GameStop Corp. is the largest video game retailer worldwide and one of America’s most famous household names. The company produces video games, consumer electronics, and gaming merchandise. For many, a trip to GameStop was a staple in their childhood. The company was first founded as Babbage’s in 1984 in Dallas, Texas, by James McCurry and Gary Kustin, before taking on its current name in 1999. As of 2021, it has 12,000 employees and over 4,800 stores worldwide.
GameStop first went public in 2002 on the NYSE, trading under the ticker ‘GME’ at the price of $18 per share. In the mid-2010s, the company’s performance declined due to its failed investments in smartphone retail and the shift from physical video game sales to online shopping and downloads. Its stock price was later further negatively impacted by COVID-19 when in-person sales fell.
In January 2021, a short squeeze of the GameStop stock took place, and it caused major financial consequences for hedge funds and huge losses for individual traders. Approximately 140% of the company’s public float was sold short, which caused a rush to buy shares to cover the positions while the price rose, which caused the price to rise even further. At its height on January 28, the short squeeze caused GameStop’s stock price to reach a pre-market value of over $500 per share, which was nearly 30 times the $17.25 valuation just weeks before.
GameStop’s market price has since remained volatile. Less than a month later, on February 24, its stock price doubled within 90 minutes and maintained a $200 share price for another month. On March 24, the stock price plummeted 34% to $120.34 after the company’s earnings were released and GameStop announced plans for issuing a secondary stock offering. However, the next day, on March 25, the stock recovered considerably, rising by 53%.
As of 2021, GameStop has a market capitalization of $15.92 billion. 36% of the company’s stocks is owned by the public, 45% by institutions such as RC Ventures, Blackrock, and Vanguard, and 19% by insiders, including the company’s officers and directors.
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GameStop does not currently pay a dividend to shareholders. This is characteristic of technology companies that prefer to reinvest excess capital back into their business to fund growth objectives.
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