GameStop venturing into the world of crypto is a wild bet
I could never get my head around the bull case for GameStop, the original meme stock, that has largely defied the odds of a floundering business model and hasn’t yet crashed and burned like nearly all the others. Last week, looking to extend this winning streak, it became a hedge fund, issuing bonds to buy crypto.Management is betting perhaps that the Trump administration’s love of the digital coin on top of crypto speculation will help more people forget the vicissitudes of its real business, and shares would fly. In the past, it would have done just that, but this time investors smelled some desperation.Bitcoin might be the most popular digital coin, but it’s also highly volatile; at $84,000 it’s well off its highs.Convert sales lead to dilution for shareholders, and these shareholders have been diluted to the hilt.
Short selling commenced.GameStop, which trades under the symbol GME, tanked 20-plus percent on Thursday following the announcement with volume about 10 times its average.
The stock extended its losses Friday. Maybe the sell-off was part of the overall market worry over tariffs, dampened consumer confidence and inflation.Or maybe reality has begun to set in on one of the market’s last great examples of pure irrational exuberance. Sure, GME has the backing of a good investor and entrepreneur, Ryan Cohen, its CEO and chairman.He’s behind the Bitcoin ploy and he also stepped into the company at a low point a few years ago and steadied its balance sheet.
(It’s become profitable.) Shares are trading far from the penny stock levels of the other memes, that is, those that remain in business. Still, what Cohen hasn’t done was fundamentally change GME’s business model.Selling video games in malls (hence the name GameStop) doesn’t make you the next new, new thing, and probably never will.
GME’s video-game sales, last I checked, fell between 2023 and 2024 and most analysts aren’t that optimistic about 2025. Stay up on ...