Since its beginnings in 1984, GameStop has grown into one of the major players in the world of video games. However, with the advent of the digital era, the company began to decline. Still, in January 2021, massive investments by retail investors, including Keith Gill, changed the way the company was viewed. In early June, the company's stock surged 74% after another Gill contribution, reigniting short-term interest and excitement among retail investors.
About the Company
GameStop is an American company specializing in the sale of hardware and software products, video games, game consoles and accessories. It was founded in 1984 as Babbage's in Dallas, Texas, and renamed GameStop in 1999. It is one of the largest video game retailers in the world with more than 5,000 stores. It currently has a presence in the United States, Canada, Australia, and Europe. It has expanded by acquiring companies such as EB Games and Micromania and also operates an online store and platforms for buying and selling used games.
GameStop shares powered by Keith Gill
Keith Gill, also known as "Roaring Kitty", has been in the limelight in connection with GameStop, as he has been active on various social networking sites such as Reddit, where he shares his opinions and analysis. He last did so on Sunday, June 2, 2024, when after more than three years, he posted a screenshot on the r/WallStreetBets forum showing his ownership of 5 million shares of GameStop stock worth $115.7 million. [1] The post caused the company's stock value to rise by as much as 74% to $40.08 the following day, but it plummeted the same day, closing at $28. [2] *
May optimism on the stock market
A similar euphoria played out last month, when GameStop shares surged nearly 180% to $48.75. This happened after the "Roaring Kitty" account published a post on the X platform. However, the craze quickly fizzled out again and the stock value plunged 54.44% to $22.21 in three days. *Despite this decline, the company made significant gains from the May rally, selling 45 million shares to raise $933 million. [3]
GameStop's share price performance over the last 5 years. (Source: Google Finance) [1] *
From the challenges of the digital market to the "meme stock" phenomenon
GameStop first came to the attention of the global media and financial markets in January 2021 thanks to the "meme stock" phenomenon. A coordinated effort by small investors on a Reddit forum, led by Gill, caused the failing company's stock price to skyrocket within weeks. However, this sharp movement in turn caused hedge funds that had bet on the stock price drop ("short selling") to suffer significant financial losses. [2]
Conclusion
Despite the slowdown in sales caused by the consumer shift to digital downloads and streaming, GameStop is gaining significant support from retail investors like Keith Gill, allowing it to make financial gains from stock sales. Although collective investing can lead to significant short-term effects, it is clearly not sustainable in the long term.
Adam Austera, Principal Analyst at Ozios
[*] Past performance is no guarantee of future results
[1] https://www.google.com/finance/quote/GME:NYSE?sa=X&ved=2ahUKEwjWluvp88GGAxXLnf0HHTC7CHIQ3ecFegQINRAh
[2] https://abcnews.go.com/Business/gamestop-stock-soaring/story?id=110771446
[1] https://finance.yahoo.com/news/gamestop-stock-price-soars-after-reddit-user-roaring-kitty-makes-175-million-bet-155344035.html
[2] https://www.google.com/finance/quote/GME:NYSE?sa=X&ved=2ahUKEwjWluvp88GGAxXLnf0HHTC7CHIQ3ecFegQINRAh
[3] https://www.investing.com/news/economy-news/gamestop-soars-as-roaring-kitty-reveals-116-million-bet-in-reddit-post-3467378