Assuming the stock exchange and SEC allows them to, and they have a strategy to use that capital. Otherwise, the value of the company per share won't really change.
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The SEC has blocked companies from issuing overvalued stock in the past (Hertz, recently) but it isn't common. And I suspect they'd feel that ending the squeeze would be in the public interest. Maybe maybe not, but it's not impossible.
But I definitely disagree that it wouldn't add any value. Right now their business is probably worth somewhere between $0 and $30 per share. If they doubled their shares outstanding at $200 do you honestly believe the extra $100/share in cash wouldn't affect intrinsic value?
When the shares are massively overvalued selling some for cash adds value. Its the exact opposite of an undervalued company doing an accretive buyback.
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But I definitely disagree that it wouldn't add any value. Right now their business is probably worth somewhere between $0 and $30 per share. If they doubled their shares outstanding at $200 do you honestly believe the extra $100/share in cash wouldn't affect intrinsic value?
Good point, though if they don't have a real plan of what to do with that cash (which I haven't seen anything good from GameStop). The book value they get with the cash would probably be Old Value + New Cash / New Float, with no multiple on the cash.
Good point, though if they don't have a real plan of what to do with that cash (which I haven't seen anything good from GameStop). The book value they get with the cash would probably be Old Value + New Cash / New Float, with no multiple on the cash.
I agree that cash in gamestops hands is probably worth dollar for dollar at the very most. Even if you figure a new dollar on their balance sheet is only worth 80 cents to shareholders they should sell as many shares as they possibly can.
My GME predictions that nobody asked for. I don't know anything about anything. Mostly collecting my thoughts but am interested in hearing what others think.
- the short squeeze hasn't happened yet. I think we have several more days to go before this plays out.
- the retail investor army is holding the majority of their shares as shown by the lower trading volume today. Some of the lower volume could also be attributed to the crap trading apps were pulling, but I think any extra volume from those would have been positive given they always had the ability to sell.
- the hedge funds involved in this aren't too big to fail and will be made an example of because everyone is watching now and sees how greedy they got. They will obviously continue to fight back as they have been but ultimately I don't believe the math is on their side if the retail investors continue to hold and wall street doesn't continue to bail them out.
- GME will issue new shares to help pad their bank account which will help support a higher share price in both the short and long term.
I think the squeeze will be accelerated if:
- an announcement is made soon about the new direction of the company going forward - see letter from Ryan Cohen to the board: https://s.wsj.net/public/resources/d...o_GameStop.pdf).
I think announcing RC as CEO would add even more fuel based on his past experience.
- an announcement is made of more stock being acquired by the major shareholders that puts even more pressure on the shorters by dramatically reducing the shares available to them...similar to the Porsche/VW squeeze in 2008. I've read but not verified that RC has an option to purchase up to 20% of the shares.
I also think RC's last tweet on Jan 17 "so you're telling me there's a chance" gif is him trolling/acknowledging the short squeeze potential just before being under a gag order due to year end financial reporting. I haven't been able to verify the gag order part yet.
I’m curious to know what people see as the long term viability of the GameStop business. Not so much in reference to the stock itself, but as a business it seems like there’s not much here. Last time I was in an EB it seemed pretty obvious that they’re desperate to move from actual video games to other pop culture items, presumably because the video game section is dying. (Not because there is less gaming of course, but because no one needs physical games and just downloads them). Maybe I’ve become an old man all of a sudden? I know they can still sell the consoles, but the margins on consoles aren’t great. There might be some people still trading games, but you have to think that EB/GameStop gets left holding an unreal number of PS3 games that are virtually worthless at some point?
I don’t know, because I haven’t actually researched anything here, but this doesn’t strike me as a particularly solid long thesis at this point (well, surely not at $20bn), but I’m interested in knowing what I’m not seeing here.
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I don't think it's a bad business at all. The underlying market - videogames - continues to grow massively, and there's no reason why a brick and mortar can't find creative ways to stay relevant. eSports, leagues, watch parties, things like that. eSports will be larger than traditional sports eventually - just a matter of time.
This has been fasinating to watch and read all your experiences on CP.
Although it looks like I may have missed out on all the fun, I'm curious how people have determined their exit positions during all of this action? In these cases where people are playing on the gamma squeezes and short squeezes, is there any fundamental or technical analysis that is done to determine exit strategies? Or is it mainly a matter of putting money down and randomly setting a sell price (i.e. looking for 50% gain)?
I'm a fairly novice investor that has historically put the vast majority of my portfolio towards 'set it and forget it' strategies (dollar-cost-averaging on index ETFs), but occasionally put a bit of money into higher risks stocks for some fun - this past week has looked so fun and I'm kicking myself for not jumping in sooner!
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I’m curious to know what people see as the long term viability of the GameStop business. Not so much in reference to the stock itself, but as a business it seems like there’s not much here. The last time I was in an EB it seemed pretty obvious that they’re desperate to move from actual video games to other pop culture items, presumably because the video game section is dying. (Not because there is less gaming of course, but because no one needs physical games and just downloads them). Maybe I’ve become an old man all of a sudden? I know they can still sell the consoles, but the margins on consoles aren’t great. There might be some people still trading games, but you have to think that EB/GameStop gets left holding an unreal number of PS3 games that are virtually worthless at some point?
I don’t know, because I haven’t actually researched anything here, but this doesn’t strike me as a particularly solid long thesis at this point (well, surely not at $20bn), but I’m interested in knowing what I do not see here.
Sears, they will exist and one day, long after they should have, they will go belly up.
The only thing that isn't online yet is accessories and consoles, and would I rather buy from EB/GameStop or Best Buy? I would rather buy from Best Buy, they have better in-store experience and better return policies. They don't have the corporate policies necessary for a brick and motor store to sell, if I go into Best Buy, my experience is that they want to chat about what I'm there to purchase and give me service (outside of Xmas). If I go into EB/GameStop and ask them even a simple question I feel like I'm interrupting them. Talking to my friend who used to manage several EBs in Calgary, their corporate policies are really bad and foster this sort of customer service.
Most of the accessories and consoles are moving towards online sales, and EB/GameStop's online presence is a disaster. The website is old and cluttered, their search is spotty at the best of times, and they have performance issues.
Can they pivot? Sure, but where to? Steam competitor? No, the industry is full and getting new competitors every day it seems. Most game companies have their own store or have bought out a major online store. Even if they wanted to, has EB/GameStop ever given the impression that they know how to gamify their loyalty program? To me, the answer is no, so even if they tried where do they go.
When I look at BlackBerry, Nokia and GameStop; two of those companies have purposes still. BlackBerry has always had a great mobile security suite of software and security-oriented software engineers, and if they had pivoted faster they may not be as beet up. Nokia has engineering talent. What does GameStop have in talent? Has anyone heard of GameStop fostering talent? I haven't and from discussions, I've had with my ex-manager friend, they do not foster talent.
So, Sears, though it might happen faster; Sears had a huge portfolio of real estate to prop them up.
- the short squeeze hasn't happened yet. I think we have several more days to go before this plays out.
I think you are right on the low available float will cause the price to go up until people run out of money or will continue it. But I wouldn't be surprised if the institution-retail short ratio is nearing parity. The retail short won't be able to handle the careering cost as long as the institution.
I also would be shocked at this point if the institutional investors haven't hedged with call options. So a short squeeze may happen; however, if it does it's going to demolish the retail investors.
This has been fasinating to watch and read all your experiences on CP.
Although it looks like I may have missed out on all the fun, I'm curious how people have determined their exit positions during all of this action? In these cases where people are playing on the gamma squeezes and short squeezes, is there any fundamental or technical analysis that is done to determine exit strategies? Or is it mainly a matter of putting money down and randomly setting a sell price (i.e. looking for 50% gain)?
I'm a fairly novice investor that has historically put the vast majority of my portfolio towards 'set it and forget it' strategies (dollar-cost-averaging on index ETFs), but occasionally put a bit of money into higher risks stocks for some fun - this past week has looked so fun and I'm kicking myself for not jumping in sooner!
This at the end of the day is gambling. This is new territory even for traders and a lot of the fundamental indicators arnt likely go predictors of price in terms of exit strategies.
Don’t kick yourself, being away from this likely isn’t a bad thing as when this comes tumbling down you don’t want to be the one holding the bag of very overvalued stock.
I am kind of kicking myself however as I was trading GME in December and early January and made about 40%. If I wasn’t as actively managing my portfolio I would be holding 600 shares of GME at a cost base of $12... having said that there is no way I would have had the resolve to hold even above $80.
As for the share issuance of GME I think it would be really stupid for the company not to take advantage of this. Even if their business model is flawed they can utilize that cash for M&A or even dovetail out of their current sector. It’s basically a blank cheque at this point. I would look at seriously taking advantage of cheap commercial real estate, modernizing their business, and acquiring some tech companies that could help them spring board to something else. Similar to how RIM pivoted away from phones.
Here's a short video from DeepF***ingValue/RoaringKitty from last August laying out what Game Stop is doing to pivot. He's the guy that started out with 54k in call options over a year ago and is currently sitting on 46 million as per his update yesterday.
My understanding is limited, but it seems that most of the silver traded by banks is only paper silver in huge volumes that the buyers never intend to collect in physical. This keeps the price down and makes it attractive to short.
Here's a short video from DeepF***ingValue/RoaringKitty from last August laying out what Game Stop is doing to pivot. He's the guy that started out with 54k in call options over a year ago and is currently sitting on 46 million as per his update yesterday.
That video is all candy and no substance, it doesn't discuss anything but the potential positives and what it does show seems u focused and scattered. Pivot to hosting D&D games? Why would I want to play D&D at GameStop versus my locally owned gaming store?
Splash in some eSports because that is trending? What are they going to do? What are they offering? What is their road map to success? What are the risks? What is the demand of that service (not the overall market)?
Revamp online? How? What is their plan? How will they compete?
What recruitment spree did they go on to get their talent?
Optimize cost of traditional brick and mortar? So they are going to cut wages, staff and corners? So their bad customer service will get worse? This also seems to complete contradict their goal for in-store experiences as those will cost money.
They may actually tank their company faster after hearing this plan.
My understanding is limited, but it seems that most of the silver traded by banks is only paper silver in huge volumes that the buyers never intend to collect in physical. This keeps the price down and makes it attractive to short.
This is no different than oil. Many forward contracts and hedges are settled on a cash basis rather than physical delivery. I don’t know if that line of thinking holds up that paper trading = attractive to short.
lol it's a 4 minute summary video. More information is out there if you look for it.
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Originally Posted by Krovikan
That video is all candy and no substance, it doesn't discuss anything but the potential positives and what it does show seems u focused and scattered. Pivot to hosting D&D games? Why would I want to play D&D at GameStop versus my locally owned gaming store?
I don't play D&D so I don't know why you would, but I also don't think that is what they are banking on.
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Splash in some eSports because that is trending? What are they going to do? What are they offering? What is their road map to success? What are the risks? What is the demand of that service (not the overall market)?
eSports is getting bigger all the time. Again the info is out there if you look for it
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Revamp online? How? What is their plan? How will they compete?
Ryan Cohen started Chewy.com, an online pet supply store despite everyone telling him he was stupid to go up against Amazon. He knows what he is doing and now has 3 seats on the board.
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What recruitment spree did they go on to get their talent?
Reggie Fils-Aimé, former Nintendo of America President joined the board last year. Apparently he's pretty good at his job.
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Optimize cost of traditional brick and mortar? So they are going to cut wages, staff and corners? So their bad customer service will get worse? This also seems to complete contradict their goal for in-store experiences as those will cost money.
Yes, their plan is to make in-store customer service worse lol.
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They may actually tank their company faster after hearing this plan.
maybe, but maybe not.
I'm not saying they have a fool proof plan, I'm pointing out the plan isn't just to stay on the current course.
As the squeeze tightens over the next week or so, it will important to monitor how much investors, especially institutional investors, will have to pay to buy back the shares. If the price keeps going or even holds steady, big funds may have to draw down on long positions in other stocks to cover their shorts if they don't have available cash. This could potentially provoke a sell-off on the market.
For me personally, I'm going to look at trimming some of my bigger positions on other stocks in advance of this to reduce this. This will also create a larger cash position to buy stocks at a discount if they drop.
