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Remember GameStop?
The video game retailer with a largely passé business model was an unlikely candidate to roil U.S. equity market structure, but indeed the historically humdrum midcap stock did just that in early 2021.
There’s no need to recap the sequence of events and roller-coaster ride of $GME shares from almost three years ago, as that’s widely known in the public record. But suffice it to say the whole affair, including spillover to other so-called meme stocks, was consequential enough for the U.S. Securities and Exchange Commission to produce a 45-page report about it.
The GameStop Short Squeeze also has its own Wikipedia page and its own movie.
Flash forward to today, and GameStop is still selling Avatar: Frontiers of Pandora, Nintendo Switch, and Pokemon cards, among other consoles, collectibles, and video games. And $GME is still making noise – kind of.
GameStop shares in the present day can be likened to Michael Jordan playing for the Washington Wizards at age 39 – okay enough if you’re looking for a few points, but without the juice, excitement, and sky-walking from years past.
To wit, $GME had a recent run-up ahead of its Dec. 6 earnings report. The stock rose from $11.91 on Nov. 27 to $13.49 on Nov. 28 and $16.25 on Nov. 29 – a 36% two-day surge – and trading volume exceeded 61 million shares on the 29th, up about 20-fold from its 2023 average daily volume.
But those numbers pale in comparison with January 2021, when $GME soared from a split-adjusted $5 on Jan. 12 to an all-time high of $86.88 on Jan. 27, and daily trading volume exceeded 700 million shares on three consecutive trading days.
Trading.biz analyst Cory Mitchell commented: “GME has been making lower highs for almost three years now. Rallies have progressively become smaller over the last two years, and have been very short-lived. Earnings growth is expected to be negative going forward, earnings have been negative over the last several years, and sales have fallen by 9% per year on average over the last five years. There is little to be bullish about except for the brief short squeezes.”
Anyone thinking GameStop’s earnings report might return the stock to its glory days of extreme volatility was disappointed, as the stock rose $0.90 to $15.75 on Dec. 7, a comparatively puny 6% gain.
So what is the legacy of GameStop stock? It’s complicated, as Time noted in a well-written September 2023 article. Many mom-and-pop traders made money on the way up, but many more lost money on the way down. The only net winners were the brokers who made money executing GameStop trades, and the company itself, which was able to raise capital by selling new shares at inflated prices.
There were some retail-level gains in empowerment and financial literacy, and retail trading activity has remained above pre-pandemic levels, but there were also many traders who got burned. Many hedge funds have expanded their risk management to stay more abreast of retail training sentiment via Reddit and other such forums. Regulators have also raised their own awareness, though without implementing any rule changes.
Add it all up, and the GameStop saga is one for the market history books. Whatever the subsequent chapter might be, it won’t be a $GME encore.
