Video games are loved by all kinds of people today, including children and adults. They make life more enjoyable for everyone. By playing video games, gamers get to relax and forget about the stress of their daily lives.
GameStop is an American company that provides gamers with the tools they need. It is the world’s biggest video game retailer and it supplies all kinds of games, consoles, and accessories from the biggest brands. These include PlayStation 4, One X, Xbox, and Nintendo Switch games.
GameStop was founded in 1984 by two Havard graduates James Mccurry and Gary Kusin. It was initially known as Babbage’s and it served as an electronics store. The store got his name from the inventor of the mechanical computer, Charles Babbage. In the following years, the company switched to video game sales and this accounted for two-thirds of its business by 1991.
In 1999, the company had transitioned into a publicly-traded company and GameStop video games had become a part of it. The company was then bought by Barnes and Noble for $215 million. GameStop had 30 stores at the time but this wasn’t enough for the new owners. So, they went on to buy another video game chain with numerous stores and rebranded it as GameStop.
Additionally, the company became independent in 2004. In the years that followed, it took over more and more video game trading stores in a bid to expand its business. Some of the companies that it purchased include Rhino Video, Micromania, and EB Games. It attained global status by 2007 with its numerous locations in countries such as Canada, Spain, Portugal, etc. As of February 2020, the company was present in over 5,000 locations across 14 countries.
The Gamble on GameStop
Gamestop seemed to be on a downward spiral due to its existence as a brick-and-mortar store and its declining share price. Its share price had dropped to $3 in 2020. However, a group known as WallStreetBets viewed things differently. This highly influential Reddit group saw potential in GameStop’s stocks and helped in driving its share price to about $20 by the end of the year.
Wall Street, several sizable hedge funds included, noticed this unusual recovery but felt that GameStop was overvalued. So, they chose to shorten the company’s stocks i.e. borrow the stock and sell it when the price fell. They would then purchase the stock and make great profits.
When this activity got the attention of members of WallStreetBets, they decided to counter it by buying and holding the stock. This was done to raise the price of the stock even higher and create a short squeeze. A short squeeze is a situation whereby investors short a stock that goes on to increase in price. So, the hedge funds had to buy the stock at a much higher price and incur great losses. The stock’s price rose to about $40 per share in three weeks and then $76 five days later. But that wasn’t all, the stock would go on to rise to an astronomical peak of $483.
The Gamestop gambling series is similar to what goes on in an online casino. Members of WallStreetBets placed a bet on GameStop’s stock and won big while the hedge funds betted against it and lost. You can check out websites not on Gamstop if you would like to gamble without restrictions. According to S3 partners, the investors that chose to short sell the stock incurred a year-to-date market-to-market loss of $19.75 billion.
2009 to 2016 was a highly successful period for GameStop as it was making an average of $9 billion annually. Its revenue of $9.5 billion in 2012 remains its highest ever. However, changes in the market caused the company’s sales to start plummeting in 2017. Instead of visiting physical stores, more and more users began to purchase games via the digital stores on their consoles. Also, another video game company, Valve, launched its virtual distribution service. This service was known as Steam and it made the process of downloading games much simpler.
The company’s sales have continued to decline despite several steps. For instance, it tried to raise money through a sale but the plan fell through less than a year later. But despite the continuous decline, GameStop is still looking to get back on its feet through new leadership. The company appointed a new chairman, CEO, and CFO in 2021. One way by which the video store hopes to move forward is by providing a wider variety of products and creating an improved shipment process.
Gamestop is facing fierce competition in the video game industry with its major competitors being console companies like Sony, Nintendo, and Microsoft. It also has to contend with distribution services like Stream. An increasing number of gamers are choosing to make their purchases online and this has greatly affected GameStop’s business.
However, GameStop is still far from finished. A major reason for this is that disc drives are still present in next-gen gaming consoles like the PlayStation 5 and XBox Series. The company also has an impressive team that is led by the highly successful investor, Ryan Cohen.