How to understand all that's going on with GME [GameStop]

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Tester83
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Re: How to understand all that's going on with GME [GameStop]

Post by Tester83 »

cyndiego wrote: Sat Jan 30, 2021 1:24 pm Thank you Tester83 and perfectuncertainty, for your detailed replies! I just learned a LOT.

A couple comments:

...

-- What do you guys think about the possibility of GME issuing new stock? Is that likely, and what would the result be?

-- Tester83, if I understand you the hedge funds/shorters options are to take the huge loss, wait (maybe even double down), or possibly play both sides? Is that it? That suggests that if wsb "holds the line", they're right and they will win? Alternatively, if they simply delay and keep the stock price on a plateau, can they simply gradually buy the same few shares over and over again and avoid the pain of the big squeeze?

-- I've been shocked at the lack of transparency for data, like the percent of float shorted. The reported numbers are all over the place. Anyone know the best source or current numbers?
From a business fundamentals perspective, it makes great sense to issue new shares. From a PR perspective, it's a nightmare. Reportedly, the amount of shares GME can issue is limited ($100 mil in new shares or something; I forget the specifics). But, the point is analysts believe that, should they issue the new shares, the longs could absorb and the squeeze goes on. But, with the overwhelming narrative that the squeeze is based on the apparent lack said stock available, then releasing new shares could be extremely toxic to GME's image (e.g. betraying their rabid WSB supporters, a corporation helping to bail out the HFs, greedy company who only cares about its bottom lines). Even if it's not true, the optics of the effects of releasing new shares would be, IMO, disastrous (see, RobinHood).

HF's are definitely taking both sides (long, short, long/short hedging). If WSB, HFs going long, and whoever else holding shares keeps up the diamond hands, and the shorts really believe they're not going to sell, in theory they would want out and stop making daily payments. Sure, HFs with shorts could buy shares slowly over time, avoiding the squeeze. But that means they are slowly closing their short position and getting out of their investment.

Research shops, HFs, and other institutions have their own resources to analyze the short position, so that's why the numbers are all over the place. NYSE releases short interest reports roughly every two weeks https://www.nyse.com/market-data/refere ... t-interest. But the time in between then? anyone's guess.
cyndiego
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Re: How to understand all that's going on with GME [GameStop]

Post by cyndiego »

Tester83 wrote: Sat Jan 30, 2021 2:23 pm From a business fundamentals perspective, it makes great sense to issue new shares. From a PR perspective, it's a nightmare. Reportedly, the amount of shares GME can issue is limited ($100 mil in new shares or something; I forget the specifics). But, the point is analysts believe that, should they issue the new shares, the longs could absorb and the squeeze goes on. But, with the overwhelming narrative that the squeeze is based on the apparent lack said stock available, then releasing new shares could be extremely toxic to GME's image (e.g. betraying their rabid WSB supporters, a corporation helping to bail out the HFs, greedy company who only cares about its bottom lines). Even if it's not true, the optics of the effects of releasing new shares would be, IMO, disastrous (see, RobinHood).

HF's are definitely taking both sides (long, short, long/short hedging). If WSB, HFs going long, and whoever else holding shares keeps up the diamond hands, and the shorts really believe they're not going to sell, in theory they would want out and stop making daily payments. Sure, HFs with shorts could buy shares slowly over time, avoiding the squeeze. But that means they are slowly closing their short position and getting out of their investment.

Research shops, HFs, and other institutions have their own resources to analyze the short position, so that's why the numbers are all over the place. NYSE releases short interest reports roughly every two weeks https://www.nyse.com/market-data/refere ... t-interest. But the time in between then? anyone's guess.
[ quote fixed by admin LadyGeek]

Yeah, I think you're right -- GME should use this as PR, but not to issue stocks.
Ironically this has been exciting (I bought one share of GME just for fun), but has also opened my eyes to how outgunned individual traders are, without access to all the data... So maybe it re-Bogled me after all, in the end?
imareal1
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Re: How to understand all that's going on with GME [GameStop]

Post by imareal1 »

I've been following r/WSB for a while now, and was watching the GME hype grow since it was at $30-40 (or two weeks ago).

One thing I observed is that MANY original WSB'ers went 'all in' when it was only around 35-40. Every other post at that point was someone YOLO'ing on GME. The ones who held to $300 pretty much 10x'ed their money. It's hard for me to believe MOST of these guys are still holding. Some may still be, but most probably sold.

People were feeling bad for this guy jumping at $150. Now people are frenetically buying $300+. It's weird.
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midareff
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Re: How to understand all that's going on with GME [GameStop]

Post by midareff »

cyndiego wrote: Sat Jan 30, 2021 1:37 pm
midareff wrote: Sat Jan 30, 2021 1:35 pm
perfectuncertainty wrote: Sat Jan 30, 2021 1:28 pm
midareff wrote: Sat Jan 30, 2021 1:25 pm Why would I want to understand any of it?
Ignorance is bliss.
So it is...... OTOH, @ 73 y/o and this bull having graced me with more than I would ever need why would I want to?
If you read r/wsb, a big motivator is that Millenials think they will NEVER be able to have the financial gains and security that Boomers did, so their only option is to gamble and try to exploit new tech and social media... Can you blame them?
As a little kid sitting at the kitchen table for family dinner with both my working parents dad listened to the stock market report on a tubed radio. It was roughly 70 years ago. I was taught early on that if you worked hard and invested monthly in solid companies (this is before mutual find) you would have a path to retirement and security. I think I do blame them.... it is far easier to think what you said they think rather than dedicate yourself to a lifelong career of employment and investing.
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Re: How to understand all that's going on with GME [GameStop]

Post by Flyer24 »

A post and several replies with a link to profanity were removed. As a reminder, this is a family-friendly environment.
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Re: How to understand all that's going on with GME [GameStop]

Post by Flyer24 »

Stay focused on investing. Several off-topic comments were removed.
latak215
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Re: How to understand all that's going on with GME [GameStop]

Post by latak215 »

I wonder if we learned another tactic of finding a heavily shorted stock, but nokia a 4$ stock more than doubled, halted a few times and came back to 4 in a day. so more strange games ? thanks
GammaPoint
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Is Gamestop really such an important company in the US economy?

Post by GammaPoint »

[Thread merged into here --admin LadyGeek]

I don't really follow individual stocks or companies at all. My investments are largely all indexed, either cap-weighted or fundamental. In the fundamental index category, I hold a little FNDB. This morning I was curious about what the holdings of that looked like, and I was shocked that Gamestop is 0.47% of the overall fund! That's higher than companies like Target, Boeing, Costco, Coca Cola, ConocoPhillips, McDonalds, American Express, Lowes, Visa, Starbucks, and I could go on. I suppose this is correct, but is anyone else sort of blown away by that? I would have naively assumed that investing in a fundamental index would give me a lot more of those latter companies than it would of Gamestop. But hey, maybe GME is more than just a meme stock and I just haven't been paying attention.
fwellimort
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Re: Is Gamestop really such an important company in the US economy?

Post by fwellimort »

There's currently an entire cult (quite literally) with some of these meme stocks like AMC and GME.

Everyone outside the cult knows some of those meme stocks are vastly overpriced. However, as long as there's enough buyers who are willing to buy at those insane valuations, then oh well.
Thing is, when stock is 'underpriced', the option is to buy. But when the stock is 'overpriced',... there's nothing you can really do as an investor without exposing yourself to infinite risk.
[I am not assuming other products such as calls and puts.]
Really makes you question the notion of 'efficient market hypothesis' (which anyone with any experience from last year should have realized markets are not efficient [it is efficient enough though for theoretical purposes most of the time]).

GME on FNDB according to its most recent portfolio holdings is only 0.4398592853%.
And no, Gamestop is not such an important company. But what can you do when there's an entire cult willing to buy the shares at such a high price. I will assume markets will slowly self correct and shares like GME, AMC will slowly go down in value.
In the meantime, oh well. Guess people like Bogleheaders (including I) will just be buying these meme stocks at ridiculous valuations through index funds.

GME started as a technical trade but since then, has become part of the 'meme' world like dogecoin.
Last edited by fwellimort on Thu Jul 29, 2021 10:27 am, edited 2 times in total.
onourway
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Re: Is Gamestop really such an important company in the US economy?

Post by onourway »

Obviously GME's current value has been driven by their attention as a meme stock, and by the willingness of many people to put money behind a company that they feel fondly about. Based on current revenues, it's unlikely that GME is worth a fraction of its current value, however a large number of people seem determined to see it remain a viable entity going forward, and are putting their money behind that. As a whole, the video game industry is certainly a major part of the US economy, and the reality is that GameStop is the only retail access point to the gaming world for much of the country. Whether they take advantage of the current situation and re-tool themselves to be more relevant in some way is yet to be seen. Fortunately, as an index investor, I don't have to think one way or another about this other than as a curiosity!
alex_686
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Re: Is Gamestop really such an important company in the US economy?

Post by alex_686 »

GME is not at all important to the economy. Nor would I argue that it is even a meme stock.

Trading in GME blew up due to specific transitory technical market issues. It was like the fiery crash of a small car. A grand spectacle that drew gawkers from miles around but ultimately means little.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
etfan
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Re: Is Gamestop really such an important company in the US economy?

Post by etfan »

As more people transition to downloadable content instead of physical media, GameStop will be at risk. Netflix recognized the transition to digital media early and began offering a streaming service and producing their own content. I wonder if GameStop will do the same. If that happens and their stock takes off, then people who bought GME now will be rewarded.
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Re: Is Gamestop really such an important company in the US economy?

Post by TheHouse7 »

The answer is no.
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Re: Is Gamestop really such an important company in the US economy?

Post by livesoft »

The folks who have sold their Gamestop stock at a huge profit have to put the profits back into the economy.
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Re: How to understand all that's going on with GME [GameStop]

Post by LadyGeek »

I merged GammaPoint's thread into a similar discussion.
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GammaPoint
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Re: How to understand all that's going on with GME [GameStop]

Post by GammaPoint »

Maybe it's my own ignorance, but the majority of the posts above replying that GME is overbought because it's a meme stock don't seem (as far as I understand) to be answering my question about why GME is higher ranked than the other list of companies I listed in FNDB, which is a fundamental index that tracks the Russell RAFI Index, which weights companies according to
the average of three fundamental measures of company size including adjusted sales, retained operating cash flow and dividends plus buybacks.
So it sounds like GME is large in terms of sales, operating cash flow, or dividends plus buybacks, unless it's some fluke that it's in the index. My concern is that I'm buying fundamental indexes because I don't want to follow the trend and buy meme stocks, so I'm a little concerned that this stock is ranked higher than the likes of Cola Cola, Conoco Phillips, and Costco. If anyone can answer this question rather than make comments that seem to ignore the fact that GME is ranked highly in a fundamental index I'd really love to know. Like I said, maybe it's simply that GME really is a bigger part of the economy that I had thought.
Independent George
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Re: Is Gamestop really such an important company in the US economy?

Post by Independent George »

etfan wrote: Thu Jul 29, 2021 10:40 am As more people transition to downloadable content instead of physical media, GameStop will be at risk. Netflix recognized the transition to digital media early and began offering a streaming service and producing their own content. I wonder if GameStop will do the same. If that happens and their stock takes off, then people who bought GME now will be rewarded.
I see this written an awful lot, usually by people who don't game, and it's never elaborated on what this actually entails. Netflix succeeded not only because it got into streaming early on, but also recognized that success depended on having a better content library than their competitors, most of whom would cut them off at first opportunity. Survival in the long-term meant being a producer of original content, because it was only a matter of time before the content creators built their own streaming services with exclusive content (see Disney+ and HBO Go).

The exact reverse is true of Gamestop - the big players moved first and either already own exclusive IP libraries (Sony, Microsoft, Valve, Epic, Nintendo), or have a massive tech infrastructure that can support cloud gaming (Amazon, Google, Nvidia). Microsoft & Amazon are attempting to do both, and Microsoft actually appears to be succeeding. What exactly does Gamestop have to offer that those much, much bigger and more experienced competitors don't? For that matter, Google has already given up on their Stadia studios, EA conceded the PC market to Valve years ago, and Amazon evidently produces malware that blows up $2,000 graphics cards. Gaming is an already crowded marketplace occupied by companies with either exclusive IP, or enough cash to sustain a loss leader for an alternate revenue stream.

Gamestop's primary value-add is as a clearinghouse for used games on physical media. In the brick & mortar world, it's an extremely low margin market with large recurring costs; online, it pits them against eBay and Amazon Marketplace.

Are they going to open a game studio from scratch? AAA games are notoriously expensive, fickle, and slow to produce.

Are they going to open an online games store? Sony & Microsoft own the consoles they run on, and can pretty much either lock out or undercut their competitors at will.

Are they going to set up a cloud-based gaming platform? Amazon, Google, Microsoft, and Nvidia already have a massive headstart on the AI and web infrastructure needed to operate it.

The point is, we already have multiple companies that can legitimately claim to be the 'Netflix of gaming'. Most of them have actually been doing it before Netflix. It's not impossible that Gamestop might turn things around with a killer app or tech that makes them competitive with the big players, but it's extremely unlikely.

GME as a value play started because its NAV was greater than its trading price, which made it attractive as a short squeeze. That is no longer the case. The most responsible option for Gamestop might be to shut down operations, sell its assets, and reimburse its shareholders.
GammaPoint
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Re: Is Gamestop really such an important company in the US economy?

Post by GammaPoint »

Independent George wrote: Thu Jul 29, 2021 11:58 am The most responsible option for Gamestop might be to shut down operations, sell its assets, and reimburse its shareholders.
This is exactly the kind of comment I'm trying to square with the fact that GME is higher in the fundamental index than the other companies I mentioned. No one would say the same thing about Costco, Boeing, etc., so what did GME do to get there.
etfan
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Re: Is Gamestop really such an important company in the US economy?

Post by etfan »

Independent George wrote: Thu Jul 29, 2021 11:58 am Are they going to open a game studio from scratch? AAA games are notoriously expensive, fickle, and slow to produce.

Are they going to open an online games store? Sony & Microsoft own the consoles they run on, and can pretty much either lock out or undercut their competitors at will.

Are they going to set up a cloud-based gaming platform? Amazon, Google, Microsoft, and Nvidia already have a massive headstart on the AI and web infrastructure needed to operate it.
I guess they have no options (besides the 3 you listed above). They can't be the Netflix of games, so they will become the Blackberry of games.
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Re: Is Gamestop really such an important company in the US economy?

Post by firebirdparts »

etfan wrote: Thu Jul 29, 2021 10:40 am then people who bought GME now will be rewarded.
This made me laugh. I think the people who bought last summer will be rewarded.
This time is the same
health teacher
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Re: Is Gamestop really such an important company in the US economy?

Post by health teacher »

GammaPoint wrote: Thu Jul 29, 2021 12:09 pm
so what did GME do to get there.
Fundamentally...

Eliminated all long term debt, 1.7 billion in cash, 25% revenue increase, major e-commerce growth potential.
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