GameStop Story: We explain what happened with GameStop

GameStop Story: We explain what happened with GameStop

We explain what happened with GameStop

Recently, the name ” GameStop ” was widely discussed by the public because its share price jumped drastically.

In fact, in the past month, the GameStop Corp (GME) stock price increase reached more than 1,000 percent and touched its peak at US $ 468 per share on the New Yotk stock exchange, US (NYSE), based on Marketwatch information.

GameStop Story, a long History

For those who are not familiar, GameStop Corporation is a consumer electronics company engaged in the retail segment. The business is selling various game items through the shop.

The company from Grapevine, Texas, USA operates a number of retail stores around the world, including EB Games, ThinkGeek, and Micromania-Zing, to GameStop itself.

The various products sold through the GameStop retail network are mostly consoles, video games and other similar electronic devices. GameStop Corp. also has a video game magazine called Game Informer.

From Babbage’s turned into GameStop

The history of the birth of GameStop dates back to 1984, when at that time the name was still “Babbage’s”. Babbage’s is a software retailer located in Dallas, Texas, USA.

In 1994, Babbage’s merger with another retail company, Software Etc., gave birth to a new company called NeoStar Retail Group.

About two years after that, the company changed its name again to Babbage’s Etc and launched dozens of flagship retail stores under the name “GameStop”, along with the site.

In 1999, Babbage’s Etc. acquired by the bookstore Barnes & Noble Booksellers. A year later, the company also acquired another video game retailer, Funco, which was renamed GameStop.

In 2004, GameStop became an independent company under its own name due to a change of share ownership.

Barnes & Nobles Booksellers itself registered GameStop as a public company (IPO) in 2002 with the symbol GME. Based on the Macrotrends website , the price of GME’s shares at that time was worth around 6 US dollars per share.

GameStop success

During its “heyday” after the IPO, GameStop acquired a number of companies and retail stores, such as EB Games, Rhino Video Games, Free Record Shop, Micromania (Micromania-Zing), Kongregate, Spawn Labs, to Simply Mac (ThinkGeek).

Due to these various acquisitions, GameStop has succeeded in expanding its wings outside the US, such as in Canada, Australia, New Zealand, and Europe. As of February 2020, the number of GameStop retail stores worldwide was recorded at 5,509 stores.

The heyday of GameStop slowly began to die out after customers began to switch to various digital video game stores, such as Xbox Live, PlayStation Network, Nintendo eShop, Steam, Epic Games Store, and so on.

This market change made GameStop’s sales performance decreased by dozens to tens of percent in the 2016 – 2018 period.

In 2019, GameStop changed its store strategy, one of which was presenting old (retro) game products and allowing consumers in stores to try out games before buying them.

Closed hundreds of shops

This strategy seems to have not worked and forces GameStop to close hundreds of shops spread all over the world. The number of shops closed in 2019 is claimed to reach 321 stores.

This shop closure continued into the following year. As of October 2020, GameStop is said to have closed around 462 stores.

The plan, this company will also close around more than 1,000 additional stores around the world until April 1, 2021.

This was triggered by the decline in sales performance of the stores themselves, plus the Covid-19 pandemic which forced consumers to not be able to visit stores.

However, online GameStop sales have reportedly skyrocketed hundreds to thousands of percent in the past few months.

In the company’s fiscal report on the year-end holiday ending in early January (Q3), for example, online sales are claimed to have increased by 309 percent. Total sales decreased 3.1 percent due to a decline in store performance, as well as the effect of the closing shop.

However, GameStop is optimistic that its business performance will rise again in Q4 which ends in March, triggered by sales of the latest generation consoles, PlayStation 5 (PS5) and Xbox Series X / S.

GameStop Stock Prices rose Sharply

Apart from the continued slumping of financial reports, GameStop’s share price recently continued to rise and reached its peak at US $ 468 per share, just moments after trading opened on Thursday (28/1/2021).

However, after the close of trading on the same day, the price fell to around 200 US dollars per share.

GME’s share price itself has seemed to have fluctuated in the last few weeks, sometimes rising, sometimes falling in a short period of time.

According to most reports, this is due to pressure from two sides of investors, namely amateur investors on the internet, such as the sub-forums on Reddit and Twitter, and asset investors on Wall Street ( hedge funds ).

These amateur investors relied on stock applications such as Robinhood, flocking to buy GameStop shares because it was triggered by positive sentiment (predictions of rising stock prices) from well-known investors, such as Chamath Palihapitiya.

Meanwhile, hedge funds , which have negative sentiment (prediction of falling share prices), reportedly continue to experience losses because they are forced to buy shares whose prices are rising, as compiled by Globe Live Media from Business Insider, Sunday (31/1/2021)

This “war” between the two sides then made GameStop’s stock price rise dramatically. Currently, Gamestop’s stock price after the close of trading on Thursday (28/1/2021) is recorded at US $ 300 per share.

Regarding Gamestop shares, analysts remind investors to be careful in buying these shares. This is because, if the increase is significant and only takes a few days, the share price could also fall sharply in a fairly short time.

Samuel Edwards
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