GameStop’s stock has been rising in the last couple of weeks. It began with the company’s announcement of three new directors. On January 11th, Gamestop announced that they would be adding three new directors to their board or directors, one of which being Ryan Cohen, co-founder of Chewy.
Cohen’s experience in digital sales will certainly help Gamestop get back on track, as the video game market has been shifting more and more to the digital platform. The company recently closed many locations and expected losses this year and the next, even though right now their stock is reflecting differently.
So, why is GameStop’s stock so high right now? Well for one, investors were pleased to see the company take on Ryan Cohen. Cohen’s success with Chewy bodes well for GameStop. However, there are a few more factors at play here that unfortunately do not have much to do with GameStop as a company.
The first thing that happened is that investors who follow the Reddit group, WallStreetBets, bought a ton of GameStop options. Arguably because they saw promise in the company and the shares were low at the time. This inevitably forced short-sellers to buy back their shares to cover their losses.
Short-selling is when investors borrow a share of stock, hoping to buy it back later for less money. Since the investors started buying up all the stocks, short-sellers had to do the same before they lost too much.
Both of those actions inevitably sky rocketed GameStop’s stock. WallStreetBets is known for targeting short-sellers, as they can get in the way of long term investment plans within the market. That being said, the group has been highlighting a few other companies as well, all resulting in similar outcomes as with GameStop. Their goal has been to drive stock prices up for companies, and lately it has been working.
However Robinhood, a popular app that allows amateur traders to trade stocks without fees, has recently put restrictions in place preventing investors from taking on any more stock from GameStop and other companies. This has prompted other brokerages to follow suit, leaving the group at a loss with their efforts.
A top post within the Reddit group is calling to ‘dump Robinhood for good’ and the group is rallying together to push back on the restrictions. The group is not happy with the restrictions because they see it as market manipulation.
Regardless of how the stock got so high, many still believe GameStop was still undervalued. They seem to be making moves in the right direction to make themselves relevant in the changing climate. Hiring Ryan Cohen was a step in the right direction, and the pandemic certainly made gaming more popular in general. Even closing physical locations ultimately helped their company, allowing them to cut costs and focus on online sales.
It is clear though that GameStop will need some way to get in on the expanding digital mindset of gaming. Both PlayStation and Xbox included digital-only options in their newest consoles, and PC gaming is almost all digital these days.
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