“GameStop” by JeepersMedia is licensed under CC BY 2.0
“GameStop” by JeepersMedia is licensed under CC BY 2.0

What was GameStop’s position before the market went crazy?

GameStop is a Fortune 500 company with over 5,000 stores spanning across 10 countries.1 The corporation is listed on the New York Stock Exchange as GAMESTOP CORPORATION GME. As of October 30th, 2020, the stock closed with a value of $10.47 USD.2 GameStop’s third quarter ended on October 31, 2020, placing their report before the short squeeze. In this report, the corporation reported that their E-Commerce sales increased by 257% and that expenses were reduced by $316 million.3 The net sales were $1,004.7 million, which was down 30.2% compared to the previous 2019 third quarter.4 The corporation has also seen their in-store sales decline by 24.6% and has closed 74 stores, bringing its year-to-date closures to 462.5 They have seen a loss of nearly $1.6 billion in the past 3 years and is in the process of closing 1,000 stores.6 Before the short squeeze, the company was the most-shorted stock in the market with over 138% of its shares being sold short.7

What did the online investors do to drive the stock value up?

The community r/Wallstreetbets is a subreddit on Reddit, a social news and forum website, who are known for high-risk stock transactions. Citron Research, a hedge fund with many short positions on GameStop, predicted that the price of GameStop stock would drop which was heavily criticized by Redditors.8 There were a large number of short positions against GameStop, Redditors figured that if they acted together, they could squeeze the stock and turn a profit.9 Many used Robinhood, a stock trading app, which later imposed a trading restriction.10 After the trading restriction was lifted, the stock value continued to skyrocket. Elon Musk, South African-born American entrepreneur, tweeted “Gamestonk!!” with a link to the r/Wallstreetbets.11 The subreddit saw approximately 73 million pageviews within 24 hours.12 There were also people buying call options, which may have assisted in the surge the stock value saw.13 As the stock value increased, short sellers were forced to purchase stock, which in turn caused the price to further increase.14 This resulted in a snowball effect causing the price of the stock to keep going up.15 On January 26, 2021, the stock would open with a value of $88.56 and close the following day with a value of $347.51.16

Timeline of events
Timeline of events

How did it affect GameStop financially?

The corporation reached a market capitalization of $33.7 billion USD.17 As the stock price fell, $27 billion in market value disappeared.18 There were also four members of GameStop’s board of directors who made $20 million from selling the company’s stock.19 Eventually, the percentage of shorts on the corporation dropped to 34%.20

How did it affect Wall Street?

One hedge fund found themselves profiting nearly $700 million.21 Citron, a hedge fund with a short position, closed their position with a 100% loss.22 Melvin Capital Management, another hedge fund with a major short position, had their assets drop from $12.5 billion to $8 billion.23 Citadel LLC invested $2 billion, and Point72 Asset Management invested $750 million into Melvin to help stabilize the hedge fund.24 Other hedge funds were worried about Melvin abandoning their positions and reduced their holdings in Clorox Co. and Expedia Group Inc.25 Short sellers lost approximately $70.87 billion from their positions so far this year.26

How did it affect the market?

At the same time that GameStop saw their stock value increase, many other corporations saw their stock values surge as well. Retail traders jumped onto other stocks like AMC, BlackBerry, Express and Tootsie Roll.27 Koss Corporation, Nokia, and Eastman Kodak had also seen their stock value increase dramatically.28 AMC Entertainment Holdings Inc saw their stock price increase from an average of $2 USD to peaking at $20.36 USD.29 BlackBerry Limited saw their stock price increase from an average of $6 CAD to peaking at $36 CAD.30 The companies who saw their stock surge have settled at an average higher stock value than before the GameStop short squeeze.

What happened to the GameStop stock since the highest price?

GameStop Corp. stock has and settled around $45 USD.31 Recently, the stock value has skyrocketed again. As of the writing of this report, the stock has reached a high of $170.01 USD.


Bibliography

Chohan, U. W. (2021, February 4). Counter-Hegemonic Finance: The Gamestop Short Squeeze. Retrieved from SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3775127 Chung, J. (2021, January 25). Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/citadel-point72-to-invest-2-75-billion-into-melvin-capital-management-11611604340 Chung, J. (2021, February 3). This Hedge Fund Made $700 Million on GameStop. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/this-hedge-fund-made-700-million-on-gamestop-11612390687 GameStop. (2020, December 8). GameStop Reports Third Quarter Results, A Positive Start to Fourth Quarter with November Comparable Store Sales Increasing 16.5% And Sustained Progress Toward Long-Term Strategic Objectives. Retrieved from GameStop: https://news.gamestop.com/news-releases/news-release-details/gamestop-reports-third-quarter-results-positive-start-fourth GameStop. (2021). Historical Price Lookup. Retrieved from GameStop: https://news.gamestop.com/stock-information/historical-price-lookup Gandel, S. (2021, January 30). Corporate executives reap millions from Reddit stock frenzy. Retrieved from CBS News: https://www.cbsnews.com/news/reddit-stocks-wallstreet-bets-executive-payday/ Intercontinental Exchange, Inc. (2021). AMC ENTERTAINMENT HOLDINGS INC AMC. Retrieved from NYSE: https://www.nyse.com/quote/XNYS:AMC Intercontinental Exchange, Inc. (2021, February 24). GAMESTOP CORPORATION GME. Retrieved from NYSE: https://www.nyse.com/quote/XNYS:GME Lyons, K. (2021, January 22). GameStop stock halts trading after Reddit drama. Retrieved from The Verge: https://www.theverge.com/2021/1/22/22244900/game-stop-stock-halted-trading-volatility Morse, J. (2021, January 27). Reddit’s r/WallStreetBets breaks all-time traffic record as hedge fund bleeds. Retrieved from Mashable: https://mashable.com/article/reddit-wallstreetbets-subreddit-record-traffic-gamestop/ Musk, E. (2021, January 26). Elon Musk on Twitter: “Gamestonk!!”. Retrieved from Twitter: https://twitter.com/elonmusk/status/1354174279894642703?s=21 Phillips, M., Friedman, G., & Lorenz, T. (2021, February 2). Plunging GameStop Stock Tests the Will of Investors to Stick With the Ride. Retrieved from The New York Times: https://www.nytimes.com/2021/02/02/business/gamestop-investors-plunging-shares.html Rao, S. (2021, January 28). Losses on short positions in U.S. firms top $70 billion - Ortex data. Retrieved from Reuters: https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW?taid=6012f37e9ac87d000147d4e3 Stevens, P., & Picker, L. (2021, January 31). Melvin Capital, hedge fund that bet against GameStop, lost more than 50% in January. Retrieved from CNBC: https://www.cnbc.com/2021/01/31/melvin-capital-lost-more-than-50percent-after-betting-against-gamestop-wsj.html Stewart, E. (2021, January 29). The GameStop stock frenzy, explained. Retrieved from Vox: https://www.vox.com/the-goods/22249458/gamestop-stock-wallstreetbets-reddit-citron/ TSX Inc. (2021). BlackBerry Limited (BB). Retrieved from TSX: https://money.tmx.com/en/quote/BB


  1. (GameStop, 2020) ↩︎

  2. (Intercontinental Exchange, Inc., 2021) ↩︎

  3. (GameStop, 2020) ↩︎

  4. (GameStop, 2020) ↩︎

  5. (GameStop, 2020) ↩︎

  6. (Lyons, 2021) ↩︎

  7. (Lyons, 2021) ↩︎

  8. (Lyons, 2021) ↩︎

  9. (Stewart, 2021) ↩︎

  10. (Gandel, 2021) ↩︎

  11. (Musk, 2021) ↩︎

  12. (Morse, 2021) ↩︎

  13. (Stewart, 2021) ↩︎

  14. (Stewart, 2021) ↩︎

  15. (Stewart, 2021) ↩︎

  16. (GameStop, 2021) ↩︎

  17. (Chohan, 2021) ↩︎

  18. (Phillips, Friedman, & Lorenz, 2021) ↩︎

  19. (Gandel, 2021) ↩︎

  20. (Phillips, Friedman, & Lorenz, 2021) ↩︎

  21. (Chung, 2021) ↩︎

  22. (Chohan, 2021) ↩︎

  23. (Stevens & Picker, 2021) ↩︎

  24. (Chung, Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management, 2021) ↩︎

  25. (Chung, Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management, 2021) ↩︎

  26. (Rao, 2021) ↩︎

  27. (Stewart, 2021) ↩︎

  28. (Chohan, 2021) ↩︎

  29. (Intercontinental Exchange, Inc., 2021) ↩︎

  30. (TSX Inc., 2021) ↩︎

  31. (Intercontinental Exchange, Inc., 2021) ↩︎