GameStop is the gift that keeps on giving as the subject of this column. And just when I think I won’t need to be writing about them for a while, some new updates come out.
GameStop’s Q2
First, GameStop reported its Q2 results for the period ending July 30th.
The results were a mixed bag. Losses per share were $.36, revenue was $1.1 billion. According to CNBC, there aren’t enough analysts to have given predictions for Q2, but other places like Investopedia noted professional estimates of $.40 and $1.3 billion. According to Forbes, this situation is the opposite of what has been going on for the past four quarters, as GameStop has been having worse losses than predicted but reporting higher-than-expected revenue.
Operating costs rose, but GameStop says it has almost no debt and a little over $900 million in cash and cash equivalents. That money is almost all due to the “meme stock” status, which they capitalized earlier this summer with their 4:1 stock split.
GameStop CEO Matt Furlong has now said they’re going to focus on profitability, a shift in his previous rhetoric:
“In each of his first four earnings calls as CEO of GameStop, Matt Furlong has included a variation of this statement: ‘Long term revenue growth is the primary metric by which we believe stockholders should assess our execution.
The earnings call today, Furlong’s fifth since becoming CEO, was the first time he didn’t make that statement. It was also the first time since Furlong became CEO that net sales declined year-over-year, rather than increasing.'”
From Forbes
Furlong stated they will be “launching proprietary products, leveraging our brand in new ways, and investing further in our stores”, but details beyond that were scant.
A New Deal, and Allegedly Breaking Some
On the same day as Q2 results were being discussed (September 7th), GameStop revealed a new partnership with FTX, a cryptocurrency exchange based in the Bahamas.
GameStop will sell FTX gift cards in some stores, and FTX is naming GameStop as the platform’s “preferred retail partner in the United States”. That is all that is known about the deal, but it does serve as more evidence GameStop is all-in on blockchain technology.
However, despite their goal to focus on the latest and greatest, they also need to make sure they’re adhering to the now — as in, current laws. GameStop is being accused of selling chat logs to Zendesk, which is perhaps best known for their customer support software. The plaintiff who made the allegations against the gaming chain filed a proposed class-action lawsuit for Californians, as the California Invasion of Privacy Act requires all parties to consent to have their conversations recorded.
This is at least the third suit pending against GameStop. A consulting firm sued the company earlier this year for $30 million in unpaid fees. And a few weeks ago, a department store chain filed claims against GameStop and several executives for allegedly breaking contracts and tort laws to underhandedly lure employees to GameStop.
Still, the stock price has risen slightly since September 7th, and as one investment strategist told Yahoo Finance Live, “It’s cultish,” referring to the Reddit- and social media-fueled stock frenzy.
But he acknowledges people have made money by joining in. And now, that’s going to be the subject of a new movie.
Dumb Money
Dumb Money is based on the book The Antisocial Network: The GameStop Short Squeeze and the Ragtag Group of Amateur Traders That Brought Wall Street to Its Knees by Ben Mezrich, who also wrote the books the movies The Social Network and 21 were inspired by. Dumb Money is slated to star Pete Davidson (Saturday Night Live), Paul Dano (The Batman), Seth Rogen (Sausage Party), and Sebastian Stan (The Falcon and the Winter Soldier) while Craig Gillespie (I, Tonya) will direct the film with a script written by Rebecca Angelo and Lauren Schuker Blum (Wolfman).
Rights are being shopped around, but filming is expected to start later this month.
If this seems rather soon, well, actually, MGM originally acquired the rights to make the film back in January 2021, when Mezrich’s book was just a proposal. The Antisocial Network wasn’t released until September 2021, and now the project is firmly moving forward after Black Bear Pictures (The Happytime Murders) took the reins.
GameStop and Its Debatable Trajectory
I haven’t read The Antisocial Network (or any of Mezrich’s works), so I don’t know much about it. From the reviews on Amazon (which, admittedly, can be useless), “fluff” seemed like a common criticism of this nonfiction tale. There were also complaints of it being written too soon, and honestly, that was my opinion of just hearing there was a movie being started now, let alone a year ago when the book was still in its conceptual stage and the saga was still in full-swing.
The stock price is still very much fluctuating (and down about 40% in about a month), and I am curious how many of those GameStop stock pushers have made a profit, are a part of the crypto crowd, and/or who are just trolls. GameStop, of course, is loving all the cash they’ve reaped, especially when they don’t have to come up with any concrete plan about how to make themselves better outside of saying the words “crypto” and “NFT”. I mean, the FTX partnership press release is a whole five sentences and doesn’t seem to indicate anything besides GameStop adding to their in-store gift card section and FTX probably putting a GameStop logo on their website. That’s hardly a huge development, especially when not all GameStops are going to be carrying FTX cards!
It is great GameStop isn’t carrying around a lot of debt, but I just don’t understand why they don’t have more of a plan. The chain’s meme stock status is certainly not over even if the story is set to hit the silver screen, but if they don’t want Mezrich to end up writing about how GameStop burned through all their cash (after all, $262 million of the $909 million is estimated to be spent by the end of the year), GameStop needs to have more big announcements than their FTX deal…and less news about people filing lawsuits against them.