"Brick-and-mortar retail sales of electronic games declined as online gaming grew. In 2013, GME diversified by acquiring Spring Mobile, a set of AT&T retail franchises. But by 2019, they had already divested that business for $700 million. Following the sale, GME had substantial cash on the balance sheet. Many investors were pessimistic about GME's management and its future, and short positions increased."
"But a smaller group saw an undervalued asset. Later in the summer, GME had more cash on hand than the company was worth, which is counter to market fundamentals. Activist investors advocated stock buybacks, and the board repurchased 34.6 million shares through Q3 2019, removing roughly one-third of the shares from the market. The short position remained high, and a perfect storm was brewing."
"GME was undervalued, and there was a significant short position. The Covid lockdown afforded many young investors time to research the market. Stimulus checks were being issued, giving disposable cash for speculative investing. Keith Gill, known by the handle Roaring Kitty on Twitter, triggered awareness that GME may be undervalued, and he became a leader in the GME retail movement. Retail investors flocked to apps like Robinhood and started buying the stock faster than hedge funds and other short interests could unwind their positions."
GameStop's stock fell below $3 in April 2020 and surged to an intraday high of $483 by January 2021 as retail investors pushed a meme-stock rally. Brick-and-mortar game sales declined while online gaming grew. GME acquired and later divested Spring Mobile, leaving substantial cash on the balance sheet by 2019. Activist investors encouraged buybacks and the board repurchased 34.6 million shares through Q3 2019. High short interest, pandemic lockdowns, stimulus checks, and retail leaders such as Keith Gill drove coordinated buying on platforms like Robinhood, producing a rapid short squeeze.
Read at Above the Law
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