Decoding the GameStop Scene-2

In this piece let’s look at the company in the middle of all this: GameStop

GameStop is one of the world's biggest video game retailers. A company whose name might be as sweet as candy for video game-loving pre-teens has left a bitter taste for many Wall Street giants.

Founded in 1984 as "Babbage's " this US-based company first went public in 1988 and has more than 5000 retail stores across the US. by former Harvard Business School classmates James McCurry and Gary M. Kusin.

Having gone through a series of acquisitions and mergers in the 80s and 90s which lead to Babbage's turning into Babbage's Etc., it launched the brand of GameStop in 1999 along with the website gamestop.com.

Although they have an online presence, the major chunk of Business for GameStop was always through retail of physical copies of video games. This business model helped it thrive and grow during the mid 00’s and become the biggest name in the market.

This model of Business which relies heavily on pre-owned technology and physical sales was soon caught in the overall decline in the sales of physical game media as the digital retailers have stepped in the room. Promotional pricing pressure, lower in-store traffic, and the general weakness in Industry were the holes that were slowly sinking GameStop’s boat. And it seemed like it was gonna finally perish against the high tides of the internet.

Adding to the already dire situation of a former giant fighting the rapid change in market trends, the coronavirus pandemic could have been the one final blow to the company's valuation that should have led to the company finally tanking and the value of its shares dropping to nil.

And that is exactly what our friends, the big boy investors over at Wall Street were thinking. Thinking and planning upon making a profit out of that by shorting GameStop's share.

What was to be a "sure sho(r)t bet" against the inevitable decline of an age-old out of demand company soon turned out to be one of the worst investments(or say borrows, in this case) for the wall street professionals as a Hollywood-esque turnaround in GameStop's valuation took place when Ryan Cohen, a successful entrepreneur, billionaire and the former CEO of online pet food company Chewy Inc started vocalizing his faith into the ability and the possibility of GameSpot to regain its former glory by revamping its model and targeting the digital space more opportunistically and judiciously.

This led to GameStop gaining attention. Even more so when Cohen matched his actions with his words and emphasized his faith in GameSpot by acquiring 13% of its shares.

The internet taketh, and so the internet giveth.
The internet took away most of GameStop’s Business and left it to the dogs(/bulls?) And It was also the internet that led to GameStop’s price going from 20$ a pop on 12th January to touching a ceiling of 396.51$ on 28th January.

So how did a billionaire's trust(and a few of his millions), a subreddit, and one-word tweet from Elon Musk lead to a sinking ship turning into a rocket? All in the next article!