GameStop saga ends. Winner: capital markets

Game over. Remember the meme-stock craze? GameStop’s shareholders certainly do. The video-gaming retailer was on the “brink of bankruptcy,” according to former boss Matt Furlong. Yet it was able to raise cash in 2021 via share sales after day traders mobilized by message-board Reddit decided that betting against the company was a moral outrage. Two years, a new CEO and a lot of money later, the company is roughly back where it started. That’s unfortunate for the mob who tried to bail it out, and the company itself. But it shows that markets are working as they should.

It is, of course, unnerving that the cost of this lesson will be borne by retail traders. GameStop was swept up in a wave of newfound popularity for trading at home, as lockdowns kept people in front of computers and unmonitored by employers. Momentum fueled runs in AMC Entertainment and Bed, Bath and Beyond, too, not to mention a slew of initial public offerings of companies that had no profit.

The day-trading crowd succeeded in one part of its mission: giving GameStop a fighting chance. By the end of 2021, the retailer had nearly tripled its cash hoard, at the time roughly a third the size of its market capitalization. Activist investor Ryan Cohen, who founded pet retailer Chewy, took over the corner office.

But last week, the company turned in another quarter of decline, which one analyst dubbed unsustainable. Its stock price has tumbled far from the heady days of the meme-stock boom: Had an investor spent $1,000 on shares at the top, their stock would be worth about $185 now. In another lifetime, GameStop might have used its cash warchest to reinvent stores, creating gaming destinations, say. But it didn’t.