Goliath vs David does happen in real life. But not quite often. Mostly it’s the big guy with resources including financial and legal muscles who bulldozes his way while almost running over the poor, hapless little David.
But what if the proverbial David, akin to David of mythology proves his might, and gets Goliath to do cart-wheels on the moon? Quite similar is the case with GameStop, an American corporate entity into the business of retailing (mind you, brick and mortar thru and thru. Not even an inch of digital in any direction the way we know it!) video game, gaming-related merchandise and consumer electronics.
Till the world was all brick and mortar, GameStop was, and according to authoritative sources, it still is the largest retailer of video games with over 5500 stores dotting North America (which includes the US and Canada), countries in Europe, and down under (which includes New Zealand and Australia). In its heydays which was as far back as a decade in the year 2011, its revenues approximated USD 10 billion which sadly fell drastically and in less than a decade in 2019 came down to USD 6.4 billion.
Back in the year 1984 when it started, it came about in Dallas in Texas, US, and was called Babbage’s. A decade and a half later its name was changed to the present i.e., GameStop. With sub-brands including EB Games, ThinkGeek, and Micromania-Zing, it lumbered along as the biggest seller till Digitization caught up. First in the form of ecommerce companies which obviated the need to visit stores to buy discs and other gaming paraphernalia, what really brought sales down was a marked shift to online games which did away with the very need for even the bare minimum of gaming paraphernalia. Adding to this was the company’s failed bid to get into retailing smartphones and to an extent the pandemic. In a way it was winding down even before the pandemic with close to a thousand stores being closed down. Year 2020 saw its sale fall by a third in the 3rd quarter to USD 63 million.
While all seemed a mix of the sombre and foreboding with stocks tanking on the markets in part due to the prevailing atmosphere as also the off-loading by hedge funds including Melvin Capital, users on redddit’s WallStreetBets subreddit argued aloud that the stocks were in reality heavily undervalued given that pandemic had brought back the interest in games aided by console makers bringing out digital-only options. According to them, buyers could make a killing by buying low and selling high later. Even the likes of ex-CEO and Investor Ryn Cohen & others ended up buying 9 million shares for USD 76 mn taking the value per share to USD 8.
Chinese whispers do work in certain situations. It did for the reddit gang whose orchestration, wilful or otherwise led to the stock reaching an astounding USD 480.00 on the morning of 29 January 2021- up 12000% from a lowly low of USD 4.00 about a year back. Having gone through the roof, brakes on individual investors’ buying on trading platforms did not yield much with prices oscillating wildly. No prices for guessing who won and who lost! For once, it was the turn of the high and mighty Hedge Funds represented by the likes of Melvin Capital which is said to have lost close to USD 5 billion in short-buying to cover its open position. Buying short saw prices burst through the roof which ended up giving individual investors some windfall- that’s before trading platforms pulled the brakes.
Moral of the Story? Dead men don’t walk without a reason, which in some cases may seem quite inexplicable.