Gamestop Surging To Bizarre High Stock Valuation over Reddit Trading Group Activity

I’m still waiting for this Star Wars Pinball machine to arrive … meanwhile, Gamestop stock is surging

Disclosure: I don’t own any Gamestop stock as of this writing. Never have owned any and no plans to buy any, again, as of this writing — although I’ll admit it’s a bit tempting and scary to jump in on this.

I do, however, still have a pending preorder on the Star Wars Pinball table from Gamestop. Haven’t heard any new update on that status, but am expecting it will arrive in the next few months.

An update on retail store Gamestop, that we last covered closing stores (see: So Much For Gamestop, They Are Closing 1,000+ Stores). There is a current conflict you might have heard about between a Reddit group called “wallstreetbets” and hedge investors shorting the Gamestop stock and losing tons of money as the stock price has ballooned from $6 a share four months ago to over $250/share as of this writing.

Check out the performance of the stock through 9:30am PT today. Crazy up and down volume:

Something tells me this meteoric rise for a stock that is clearly ridiculously overvalued will lead to some sort of federal scrutiny. I don’t know what, but it doesn’t look good.

It sure has mountains and craters aplenty to look at from a graphing standpoint.

GameStop, hedge funds’ most-hated stock, was targeted by an army of retail investors who marshaled forces against short sellers in online chat rooms. In the Reddit forum “wallstreetbets” with more than 2 million subscribers, rookie investors encouraged each other to pile into GameStop’s shares and call options, creating massive short squeezes in the stock. CNBC could not confirm the amount of losses Melvin Capital took on the short position. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin’s hedge fund to shore up its finances.

Melvin Capital, hedge fund targeted by Reddit board, closes out of GameStop short position

Perhaps nothing illegal has happened here, but is Gamestop really worth $250/share from four months ago? If enough investors believe that it is then, yes, it is. Doesn’t matter that hardly anybody buys physical videogames in person any longer. They do buy systems and probably buy and sell some used games, but it’s not a market on the rise. Gamestop should be expanding into some sort of online digital assets business or become like the Amazon of videogames (maybe that’s what they’re trying to do). That’s their only way to survive, in this author’s opinion. Again, I don’t have any money in the stock, so I’m not going to profit from the business succeeding or failing. I’d like to see Gamestop stick around though, if for no other reason than they are a well known retail gaming entity and I like gaming. That nostalgia factor doesn’t translate to a viable business though.

Will this stock price crash? It’s likely to happen. I’m not giving any investment advice. That would be illegal without a license and it’s pure speculation anyway, but I do think common sense and investing go hand and hand. Just ask yourself how a business that was closing 1,000+ stores recently in the middle of a pandemic is suddenly, miraculously worth this much more money?

(if the investors say it is, it is)

Maybe this is the problem with the stock market in general. That it can be extremely volatile for a wide variety of reasons. Both ways. A group of people can say that something sucks and to sell, so the stock price tanks and vice versa. Neither can be tied in any tangible way to if a business is profitable and making good business decisions.

Ironically, AMC stock is also a subject of this Reddit group and that stock has seen some gains as well.

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