GameStop is an American-based company. The company deals in video games, gaming, other electronic consoles, and retailer merchandise of video games. GameStop was founded in 1984, by American businessmen James Mccurry and Gary Cusson. GameStop is considered the largest retailer of video games in the world as it has 4816 retail stores operating worldwide. The headquarters of the company is still in its founding place Dallas Texas. Initially, the company was given the name “Babbage’s”, but later in 1999, it was changed to “GameStop”. The core business of GameStop is to sell new and used software and hardware to video gaming enthusiasts.
Early Years of GameStop:
The company survived a video gaming crash in its early years. In 1987, the company started selling the “Nintendo” video games successfully. When the competition became tough in the early ’90s, the company merged with a software retailing company and came up with a new name “NeoStar”. Leonard Riggio bought the company by paying the buyout and renamed the company “GameStop” in 1999. Leonard Riggio was also the major shareholder of “Barnes and Noble Booksellers”, so the company came under the supervision of “Barnes and Noble”.
The biggest breakthrough that GameStop got was they became part of the launch of PS2. After that, the company started trading new and used sets of video games and other software and hardware in their retail stores. After seeing the success of the company, the company showed interest and put the third part of the company on the New York stock exchange in 2002. And by 2004, all stores owned by independent retailers were under the banner of GameStop. After seeing the success of GameStop, the owners launched a new chain named MovieStop.
Successful Period:
In 2004, GameStop successfully got the ownership rights of the rival company “Electronic Boutique” now known as EB sports. The company was bought for a whopping sum of $1.44 billion. This helped the company to thrive across the continents and new stores were opened in Europe, Australia, Canada, etc. Looking at the previous success, in 2007, the company also acquired the ownership of “Rhino Games”. The price of this deal was not made public. Further expanding the business, in 2008, $700 million were paid for the purchase of “Micromania”. This practice of purchasing rival companies continued for a long time. In this way, GameStop continued to be the biggest retailer of video games.
In 2005, GameStop held a mega midnight event for the launch of the new “Xbox 360”. After that, GameStop also became the battlefield for “Nintendo” and “PS3”. In that era, prices of stocks of GameStop skyrocketed which will be discussed later. Despite the unstable condition of the economy, GameStop continued to be a success and was in good condition to expand its business.
In 2010, GameStop became the ultimate king when the last present competitor “GameCrazy” liquidated its assets and was gone from the market.
But, like every rise has a fall, the same happened with GameStop when big retail groups like “Walmart”, “Amazon”, etc also launched their video game retail stores for the trading of video games. Many scandals were exposed that damaged the popularity of GameStop.
Other Ventures:
GameStop also started some projects similar to the theme of video gaming and software. It all started with the trading of new and used movies. However, this idea did not thrive much and it was discarded after a few years.
Another similar idea is the GameStop T.V. This project is entirely run by the core team of GameStop. This helps the users to stay updated with the upcoming games and telecast the interviews of exclusive developers etc. This is an ongoing project.
Game publishers get more pre-orders by including physical or exclusive in-game bonuses, available only if the player has pre-ordered the game. Bonuses often include extras such as exclusive characters, weapons, and maps. For example, GameStop included an additional avatar costume for Call of Duty: Black Ops when it was released in November 2010, and an Illustrated Art-Folio for Metroid: Other M’s Soundtracks, Art Books, Stuffed Animals, figurines, posters, and t-shirts. . They were also special bonuses.
Stock of GameStop:
As mentioned earlier, GameStop entered the stock market in 2004. At the start, the stock prices of GameStop were stable. But havoc was created due to the latest pandemic going on in the world. We all are familiar with the fact that there is nothing as unpredictable and unstable as the stock market. GameStop suffered the same unpredictability in the recent pandemic.
You must have now heard of the GameStop action-based stocks story. Technicalities might flow above our heads, but one thing was sure, one thing was crystal clear that the small investors have come together to take on the big guys on Wall Street to beat them at their own game.
At the start of this saga, GameStop looked at the front foot. But for the near past, the markets have been everywhere. This was the time when the decline started. We will discuss the decline in detail later. In 2004, Barnes and Noble dissolved their stocks to Barnes and Noble shareholders. At that time, GameStop was an independent company and there was no better way to do that. The influx of new games caused the prices of shares of GameStop to skyrocket. You can estimate the success by the fact that in 2002, the launching price was $9.95 per share, but the price of one share jumped to $28.33 by the end of 2006. And one year later, the stock price hit a staggering price of $61.45 per share. This was the peak of the company’s stock price. The company was discovering new horizons over time.
Stocks Saga of GameStop:
A member of the popular Reddit group Wall Street Bets discovered that some hedge funds were too short or were betting against certain stocks. This was when GameStop’s real downfall began. Melvin Capital, one of Wall Street’s leading hedge funds, was among the tempered stocks. This fund was launched in the year with around $ 12.5 billion in assets but has fallen more than 53% in the past. During January, after taking one of the top short positions in GameStop stocks.
When the scandal of hedge funds came to the scene, the company started to lose value. The company’s stocks were losing value with every passing time. But, this situation was handled by tactical geniuses and the stock prices reached a whopping $483 from the lows of $17. This was done people joined forces on the Reddit forum WallStreetBets. It helped to drive up the company’s share price by 1,500%. It was given the name “Short Squeeze”. This is considered one of the wildest months in economic history.
Breakdown of Saga:
Before the “Short Squeeze” there were already some fluctuations in the stocks of GameStop.
In December 2020, it was reported that the stock prices saw a drop of 30% as compared to the same time in 2019. Fewer sales in the retail stores were considered one of the main reasons for the drop. But the shinning part was the increase in the online sales of the company. However, a loss of $63 million was reported in the third quarter of the year.
In early January of 2021, after the appointment of new directors, the stocks were closed at almost $32 on January 13, which was 50% more than January 11.
Criticism was also pointed towards the buyers of shares of GameStop. A stock research firm known as Citron Research took a dig at the stockholders of GameStop and called them suckers. The firm considered it as a poker game as the prices of the shares were never stable. But, later the statement was denied by the firm by giving the reason that the Twitter account was hacked.
As the standoff between daily investors and hedge funds intensified and support for GameStop increased on r / wallstreetbets, the stock skyrocketed by over 50% in the January 22 trading session and closed at $ 65.01. During business hours and pre-market negotiations this weekend, GameStop continued to climb. On January 25, it opened at $ 96.73.
Some famous people also became part of the tug-of-war. As of current reports, GameStop has gained some stability.
Ryan Cohen: New Director
On January 11, 2021, GameStop took three new faces on board and Ryan Cohen was one of them. He was appointed as one of the directors of the company. Ryan Cohen is considered the darling of Wall Street. Ryan is the founder of the famous e-commerce company “Chewy”. But, before that, he had heavy involvement in GameStop. He was a major shareholder of the company through “RC Ventures”. Cohen tried to expand the retailer so much that it can compete with “Amazon”.
He has no experience in the video gaming world but he is trusted because of his experience. He outplayed Amazon in the department of pet-related items. The Board of directors is hopeful that Cohen will help the company to survive the difficult period and will use his e-commerce experience to take out the company from loss.
The intentions of Cohen are very clear. He has certain plans for the future. He has already started to implement some of them.
E-Commerce Tech. Company:
Ryan Cohen wants the company to adopt modern means. He wants to get rid of retail stores and wants to introduce the system of e-commerce within the company. He wrote a letter to the company in which he said, “GameStop’s leadership should immediately conduct a strategic review of the business”. With that, he also shared an incredible plan to take the business to new heights. He said that the company should evolve in technology and e-commerce. It will attract gamers.
This letter made the company review its business model. As a result, the company hired him along with his two business companions in the GameStop.
Hiring of Experienced Leadership:
After the appointment in the company, Cohen was given charge of strategic planning and capital allocation committee. New leadership were former Amazon and Chewy members. Some notable recruitments included:
- George Sherman as CEO
- Jim Bell as CFO
- Jenna Owens
- Matt Francis
In his first few months of the charge, he has almost revolutionized the hierarchy of the company. And it has some positive effects.
Online Trading System:
Trading is the basic component of GameStop. When Ryan Cohen initially bought a significant amount of the company’s stock, he proposed a plan in secrecy to the board to start focusing GameStop on e-commerce opportunities.
He suggested launching an online in-game trading platform.
Ryan Cohen is hopeful that the company will regain its lost potential again. He has not yet publicly revealed his complete plans for the company’s future. His team is also hesitant about the public announcement of the plans despite being asked again and again. Besides this, Cohen is also facing some criticism but any of it is not bothering Ryan Cohen and his team.