I was wondering if GameStop would use their once in a lifetime overpriced valuation to raise money to invest in a game streaming platform (ie Netflix for games).
GameStop had YEARS to adapt themselves to the new gaming situation, but they instead chose to go the way of the strip-mall and follow the example of BlockBuster Video.
When did Steam get started? The middle-naughts? That was the time for GameStop to act. It's too late now. Even if they have the money, do they have the leadership to pull this off? Maybe they'll try, but it will be an uphill fight, even with the Chewy founder on the board.
I expect the execs will find some way to parachute out and that there will be no transformation of GameStop.
15 years ago they could have tried to compete or pivot.
Now they are in position of an underdog with no experience vs established platform - Steam, Epic, GoG - if talking about selling games.
You are basically suggesting that Gamestop have a second chance to compete vs Amazon, or Ebay, or Facebook for that matter.
They are starting from scratch, all they have is physical locations. And presumably infrastructure to manage those locations. No software teams, no user base, 0.
I realize i sound very negative but saying there is a second chance for a ship that has been sinking and captain gave everyone a bucket as means of coping is not going to miraculously fix itself. Especially since they are now 100% thinking how to exit with that cash.
> They are starting from scratch, all they have is physical locations. And presumably infrastructure to manage those locations.
I don't know if you know this, but that's actually kind of a big deal. Nationally distributed brick-and-mortar stores with logistics and connections in place to supply these locations are expensive and time consuming to stand up.
Those locations and logistical infrastructure could be a huge opportunity for them to pivot with, or you could think of it like collateral/capital that they could liquidate for pivoting in a different direction.
> No software teams, no user base, 0
Believe it or not, not every business has to have teams of software people churning out gamified node apps.
Not every company needs to start with a user base to abuse and exploit in order to be successful, and not every company needs to become the next Amazon/Google/Tesla in order to be successful and contribute in a meaningful and sustainable way to the economy and provide value for customers.
I sincerely hope you don't approach every challenge you meet in life with the same defeatist attitude. Use your imagination and don't give up!
Actually Stadia will be dead in a year, judging by what has happened with it. Still, what does gamestop have in terms of software? A webdev team? Creating a games streaming platform is an enormous project.
Unless they are issuing new stock, or selling stock that they hold, I don't really see how its valuation helps the company. Likely it's very good for their execs, though...
However I'm actually not sure how quickly companies can do that. It has to be done by the board. Can they just hold an emergency meeting and authorize it within hours? Or is it the kind of thing that requires certain approvals which require weeks or months?
It could also be a huge PR backfire. If the stock then drops back down, then they could be accused of taking advantage of naive redditors -- not that that's necessarily true, but there's definitely risk of it. I mean, is that what a "responsible" public company is supposed to do?
You should read Matt Levine, he covers all these questions in depth. The answer to your question is that the board can hold the meeting on Twitter and pass the issuance of new shares that way if they wish.
The problem is shareholders suing for securities fraud. That the people who bought at the top are now shareholders. The company has a fiduciary duty to them. If they issue new shares and sell them, that lowers the price. Even if everyone agrees that the price doesn't make sense and issuing new shares is actually good for the company (the price will drop less), the company actively did something the shareholders probably weren't giving fair warning about.
Turns out the board doesn't even have to meet in this case. Levine wrote Jan 25:
> Happily, GameStop does have an ATM offering going. It put it in place on Dec. 8, 2020, when the stock was at about $16.35. The way these things work is that GameStop disclosed that its bank could sell stock—up to $100 million worth—“from time to time” at GameStop’s request “consistent with its normal trading and sales practices”; it did not disclose any particular schedule, and has not yet reported if any shares have been sold, or how many, or when. So I don’t know if GameStop had sold the whole $100 million before Friday’s wild run, or if it had any stock left over to sell; if it had any left over, I don’t know if it sold it all on Friday. I hope it did! [1]
On the other hand, that may have been extremely lucky. When Hertz tried to issue more stock in June, the SEC objected so it never happened -- as it was too likely the buyers would be purchasing essentially worthless shares. [2]
Yeah even if they pivot to be a completely different business model, no massive influx of cash is a bad massive influx of cash. Many companies would kill to suddenly go from death spiral to multi billion dollar.
They have been raising money with an ATM offering since December (https://www.sec.gov/Archives/edgar/data/1326380/000119312520...). However, it is not clear when packets of stock were offered, i.e. it could have been already before the high price.
AMC on the other hand did take the opportunity of the high price to do an ATM offer IIRC.
It seems to me all the streaming gaming services so far have been a flop. In order for it to work, we need really high bandwidth, reliable internet connections and low latency. The technology maybe isn't quite ready still, because we haven't really been focused on the reliability of internet connections and wifi, just more peak download speed. Streaming gaming sounds sexy, but IMO, it's probably bound to keep being a flop for the next 5-10 years. Not something I would invest in.
I am stadia subscriber and I can say that I have fallen in love with the platform. I used to play games more often and don't own a gaming PC or console, nor did I want to purchase one. Performance has been stellar thus far.
I played through Cyberpunk 2077 on Stadia and I'm lukewarm about it. On the other hand it's a good way to experience new games without the hardware (I played on a seven-year-old Hackintosh), but on the other hand, it's not a great gaming experience. Visual quality has issues and there is always some input lag even on a good connection.
Clearly not everyone thinks that's the state of affairs. Roaring Kitty has clearly done quite a bit of research and thinks GME is undervalued. And if you believe that many of the folks on /r/wallstreetbets are being genuine, then they feel similarly. Time will tell. But there's certainly no guarantee that this is a "once in a lifetime overpriced valuation".
A retail company, who hasn't made money in 5 years, hit hard by a pandemic. Gaming consoles going entirely digital. "Common sense" here is not well defined when most of the valuation is because Michael Burry bought into the stock and Ryan Cohen joining the team.
I don't think streaming games will ever be a viable business. Maybe for slow turn based games it works fine, but anything time/frame rate sensitive is a no-go. I just can't see it ever going beyond novelty.
