Page 28 - E- Connect 2021

GameStop Saga
GameStop

Digvijay Singh Shekhawat
Digvijay Singh Shekhawat

GameStop is a video game, consumer
GameStop is a video game, consumer
electr
onics, and gaming mer
-chandise r
electronics, and gaming mer-chandise retailer etailer
of
,
the
is
which
company, the headquarters of which is in in
ters
company
headquar
Grapevine, Texas, United States. The company
Grapevine, Texas, United States. The company
became a talking point when its stock price was
manipulated by the users of r/wallstreetbets (a
sub-reddit group).
GameStop as a company was not doing well, as r/wallstreetbets caused an increase in the
as the change in the market caused a fall in their share price of the company. They did so by a
business. It happened so as the gaming platforms process called “short squeeze”. The company STUDENTS
went online, providing services such as Xbox experienced a 1,500% hike in their share price.
Live, PlayStation and Steam, all of which can be A short squeeze is a trading term which
downloaded, hence they suffered a drop in their means when a stock that is heavily shorted all
sales. The change in the market condition caused of a sudden gets positive news or some kind of
financial losses to the company and the stock price in-citement, which makes a lot of new buyers to
of the company went down consistently. 2018 was buy the stock. When this happens, the stock is
the worst financial year for the company. Hence, bought up and the shorts are now forced to cover
the company witnessed a drastic management their positions (getting squeezed out), which then
change. GameStop decided to partner up with results in more buying which can cause a stock to
some outside de-sign firms in July 2019 and go up rapidly and by a lot. The subreddit group r/
focused more on competitive gaming and retro wallstreetbets also triggered a short squeeze on
gaming theme. Moreover, COVID-19 was just the another company known as AMC.
tip of the ice-berg as GameStop was required As of today, the share price of GameStop is down
to close around 3500 stores’ physical operation, again. The subreddit group also faced criticism
and as a result, the company was hampered by it. for manipulating the markets and caus-ing losses
GameStop was also criticised by social media to many investors. Here we can experience
and its employees for the way they responded to how a group of investors manipulated the share
the pandemic. People accused the company of price of a company by a technique called as
focusing more on the business than the health short squeeze which increased the share price
and safety of its staff and customers. of a company which was not performing well for
In January 2021 a subreddit group known quite some time. And we can also learn from this
that fundamentals do not matter until they do.
GameStop’s unprecedented rise makes it clear
that speculators are driving the movement in
several corners of the market today, and many of
these traders are buying stocks based on what is
trending. But eventually stock valuations return to
historic norms. Fundamentals prevail.

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2021-2021