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Stock climb could be repeated by ‘GameStopRise for the Players’

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The wild rise of GameStop last ye may just be the beginning.

“[On Reddit, we’ve] never stopped talking about GameStop … I want to see the price keep going up,”Joe Fonicello, a student at college and an early investor, speaks in the documentary. “GameStop: Rise of the Players,”Friday, in theaters

The film, which debuts exactly a year from the phenomena, explores how a bunch of meme makers and gamers turned the seemingly struggling chain’s stock into a bullish investment that reached a high of nearly $500 per share in early 2021, up from a low of roughly $3 in 2019. They made $70 million while causing $13 billion in losses to hedge funders.

GameStop was not disappointed by the wild ride. “sex appeal,”Fonicello says that there was a time when Redditors saved the stock (which trades under the symbol GME), and laughed at it.

REUTERS

A graph that shows GameStop’s stock price.Google Stocks

Wall Street Bets, the Reddit hub of memes and financial advice responsible for fueling the GME surge was so initially anti-GameStop that early investors like Farris Husseini — an Alabama data visualizer — were banned from posting about the company because it annoyed so many users.

“GameStop was hated among gamers, like hated,” Jeff Tarzia, a former video game tester and one of the stock’s few early supporters, says in the documentary. He admitted that the bias was understandable. GameStop, known for poor customer service and pathetically low values for game trade-ins, was predicted to be next Blockbuster. This was because the video gaming industry was rapidly shifting to online retail prior to COVID.

True believers

Keith Gill, better known as YouTube’s Roaring Kitty, was one of the first believers in GameStop.

Despite all of this, GameStop’s true believers in the US managed to find community early in the pandemic by joining forces with Keith Gill, a GME investor, and streaming nightly livestreams. Better known as “Roaring Kitty,” Gill is now widely regarded as the prophet of GameStop’s success.

Gill and his followers would hyperanalyze the numbers several nights per week. But the big step-up came when Ryan Cohen (co-founder of the pet food ecommerce company Chewy), bought large into GME. He joined the board in 2020 and was later elected chairman.

Cohen — who was confident that his old startup Chewy would have succeeded selling any product — was quick to jump on the front line of GME by holding one-on-one Zoom calls with investors.

“He literally just peppered me with questions, ‘What do you see in GameStop?’”Justin Dopierala is an investor and founder of Wisconsin-based DOMO Capital. This firm manages mostly blue-collar clients.

Super LTD.

GameStop was quickly restored to its former glory by the new head honcho. In a move that impressed CNBC’s Jim Cramer, he shook up the executive board by bringing in Amazon bigwigs in 2020, while also deeply connecting to the everyday people who put their money into the once failing company.

By late August 2020, the stock — which had bottomed at below $5 in April — was around $10 and climbing. GME’s faithful were rewarded by a few glowing signs that things were heating. GameStop signed a multiyear strategic partnership with Microsoft, and consoles like the PlayStation 5 announced they would still have disk drives rather than being download only, keeping the lifeblood of GameStop’s products on shelves.

“It tells me the brand’s not dead, it tells me there’s still a rabid consumer base that wants their products,”Ron Alzmann, an early investor who became a regular on financial TV, speaks in the documentary.

Reddit’s Wall Street Bets crew took notice and started taking GameStop seriously.

Users also became aware of a plan by Melvin Capital, a publicly admitted hedge fund, to put GameStop out-of-business by short selling its stock. That’s when the the players united to take on the big boss — Wall Street itself.

“Reddit saw that happening and said, ‘Woah, woah, woah, we can stop this,’ … It was the perfect storm to destroy a hedge fund,” Tarzia says.

In January 2021, Redditors across the nation banded together and historically bought into GameStop, causing Melvin’s fund to plummet 30 percent — and requiring that Mets owner Steve Cohen and Ken Griffin’s major firm Citadel step in with a $2.75 billion bailout.

Soon after, Melvin, the winner of the game, walked out of GameStop and declared victory. This was just as its stock reached $483 per share. Redditors were inspired by the success to take similar actions against companies like AMC and Blackberry.

Redditors are to be repaid

Super LTD.

But Wall Street bigwigs weren’t about to just roll over.

In late January 2021, major firms halted GME trading while trading apps such as Robinhood and TD Ameritrade also restricted actions, causing GameStop’s stock to drop to around $90. (On Thursday, Robinhood was cleared of all charges by a federal court.

The move — which had stocks hitting $40 the next month — was so controversial that several class action lawsuits were launched against Robinhood and congressional hearings were hosted after the everyday investors had their portfolios demolished.

A controversial decision to slow GameStop trading by Robinhood led to the store’s stock tanking.

“It’s just a little bit too convenient that you’ve got Melvin Capital losing billions of dollars, Citadel backing them and then two days later Robinhood is stopping people from buying it. If that’s what’s happening, they all are in bed with each other, which is scary,” Tarzia alleged.

Alzmann, however, believes that trading platforms were too stretched and faced liquidity problems.

Even though the bubble burst and it seemed like the GME craze had ended, Gill and other investors remained with GME and reenergized last winter’s movement online, encouraging public belief that GameStop would rise once again.

Jeff Tarzia at his laptop. Super LTD

The question of “is the squeeze sqouze?”Reddit is home to the latest legions of GME converts. Many of them believe Cohen will bring greater returns to the hallowed stock.

But whether or not GameStock, currently valued around $93 a share, will yield continued returns, it’s undeniable trading has been forever changed.

“You don’t have to be a financial expert to be a good investor, to be a good trader. Anybody can analyze a company nowadays, you can go onto the internet and start reading,” Husseini said.

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