The recent past has demonstrated that the trading of GameStop stock differs from other equities. Here are three compelling arguments that favor visiting the local video game retailer.
The management of GameStop has been working on a strategy to turn the business around, and recently, they have been concentrating on increasing profitability.
The stock of GameStop continued to be a favorite among retail investors. It significantly impacted the company’s share price.
The video game retailer’s shareholders continue to immediately register their shares to decrease the stock available for short sellers.
1. The Management of GME Is Driven to Achieve Short-Term Profitability While Making Aggressive Efforts to Reduce Expenses
In the second half of 2022, GameStop’s management has a single goal: to achieve short-term profitability while simultaneously reducing costs to an extreme degree.
Until a few months ago, management had been adhering to a turnaround strategy for the company centered on expanding its technological skills. The strategy called for the complete overhaul of the company’s board of directors and investments in web 3.0, e-commerce, cryptocurrencies, and NFTs.
However, as the CEO of GameStop, Matt Furlong, noted before the end of August, the company’s focus has shifted.
This shift in emphasis is mainly attributable to the dramatic shifts in interest rates and the effect this has had on the distribution of available capital. According to what was stated by the Chairman of GameStop, Ryan Cohen, the value of short-term cash flows is significantly larger than the value of long-term cash flows because of the current high-interest rate scenario.
Cohen stated that GameStop is aiming for more significant returns and concentrating considerably more on the short-term profitability of the business.
According to the company’s chairman, for GameStop to attain short-term profitability, the retailer has been aggressively lowering expenses and should continue to do so in the future.
In July, GameStop announced significant reductions to its workforce, which included the departure of Mike Recupero, the company’s former chief financial officer. The video game shop brought on more than 600 new workers between the end of 2021 and the middle of 2022.
Additionally, GameStop disclosed a new remuneration system for its employees. It was determined that non-employee directors would receive no monetary compensation for their roles in the company. In the end, Chairman Ryan Cohen and former Chief Executive Officer George Sherman chose not to accept any remuneration.
2. The so-called “Kardashian economics” are still in play today
In the documentary Eat the Rich: The GameStop Saga, available on Netflix, the managing partner of S3 Partners Research, Bob Sloan, refers to the term “Kardashian economics.”
Sloan believes that when the macroeconomic environment is more uncertain, it is risky to short the stock market. Short sellers are underestimating the risk of being squeezed out of their positions. It is time to stop thinking of extraordinary occurrences like GameStop’s stock squeeze in January 2021 as once-in-a-lifetime opportunities.
The popularity of GameStop on social networks and the internet remain highly relevant nearly two years after the short squeeze event that occurred in January 2021.
The phrase “GME” is frequently among Google’s most famous stock tickers (see below). In addition, there is a forum on Reddit called r/superstonk that is solely devoted to covering GameStop stock. It has more than 847,000 very active subscribers.
3. The Movement Toward the Direct Registration System
When one considers the Direct Registration System, it is clear that socially responsible investing in GameStop is going strong even after all these times (DRS). This method, which allows shareholders to register their shares with a transfer agent directly, has exploded in popularity among GameStop’s retail investors in recent years.
Even though using direct registration to sell shares is less convenient than using a brokerage firm, shareholders benefit in various ways.
Shareholders can now own stock without the assistance of a broker thanks to the Direct Registration System. The fact that shares registered through the DRS cannot be leased to short sellers, in contrast to shares held through brokers, is the most significant advantage of this arrangement.
This year, once the DRS movement started to gain traction, GameStop started directly disclosing each quarter to the transfer agent the number of shares that were moved out of the company.
After July, there were approximately 71.3 million shares that had been registered using DRS. After an additional four months elapsed, these figures are likely even higher.
It is estimated that individual investors currently control close to seventy percent of GameStop’s outstanding shares. This suggests that around four out of every ten individuals who invest in the retail market have registered their shares with DRS.
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