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The Big Challenge at GameStop

Today, one of the sectors where digitalization has an impact is the gaming industry. The structure of the Gaming Industry changes day by day. The industry is shifting to the internet. Undoubtedly, one of the leading companies affected by this situation is “GameStop”. It is a company that sells electronic devices and video games.

Gamestop announced more than $ 470 million in losses in 2019. 

The company, once the locomotive, has been experiencing serious losses in recent years. Especially in 2019, the company declared a loss of more than 470 million dollars. Also, pandemic has forced the company in 2020.

With the impact of the pandemic, the company’s share value declined to $ 2.57. 

The difficulties experienced were reflected in the shares of the Company. The share value decreased to 2.57 dollars in the spring of 2020. With the introduction of the US Federal Reserve (FED), the situation in the stock markets reversed in the summer. Thus the company closed the year with a share value of over $ 17. Small investors believed that the problems began to be solved. Therefore the share value increased from $ 3 to $ 17. They added their GameStop shares to their portfolio more. Lastly, the share value increased to over $ 40.

Gamestop
GameStop (Photo by Michael Förtsch)

The sudden increase in value in GameStop stocks divided investors into two. 

Obviously, speculative movements in the stocks of a downsizing company divided people into two and created a debate. The controversy was fueled by Citron Research. It is a hedge fund renowned for its short selling operations. They described the people who bought GameStop shares on $ 40  as a “sucker”. Also they mentioned that the maximum value of Gamestop share must be $ 20. 

Citron Research had to buy the company shares for around $ 200, which he said would be foolish to buy for $ 40. 

The day after the announcement, the share value saw $ 76. Small investors, organized in various forums. Especially in Reddit, they made planned purchases. They carried the share value to $ 200. This put the million-dollar funds short-selling into a very difficult situation. They bought millions of shares at prices in the range of 150-200 dollars and lost huge amounts in order to cover their deficits. Citron Research, one of these funds, had to buy company shares for around $ 200, which he said would be foolish to buy for $ 40. Though hard to believe, small investors managed to get organized and beat million dollar funds. It is certain that this event will not fall out of language for many years, no matter how it ends.

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