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GameStop: A Different Conversation

Apr. 07, 2021 11:50 AM ETGameStop Corp. (GME)219 Comments
Zero Sum Gamer profile picture
Zero Sum Gamer


  • Evidence indicates GameStop may be better understood as a momentum play rather than a short squeeze candidate.
  • Reddit community behind GME's meteoric rise showing signs of internal conflict.
  • GME's new application for a secondary offering worth $1 billion equally bullish and bearish, depending on the weight assigned to dilution versus bootstrapping.

This article will represent a divergence from my normal securities analyses on Seeking Alpha, because let's face it, GameStop (NYSE:GME) has been anything but a normal stock. Rather than rehashing the usual bull versus bear arguments with financials as supporting evidence, this article will attempt to do a deep dive into a few of the data points that make GameStop such a unique name on the market today. This part usually goes at the end, but for this piece, I'm going to put it at the beginning: the author has no current position in GameStop. He sees the stock as a once in a lifetime black swan event that is a dangerous entry for bulls and bears alike, and is following this story purely for fun.

Consensus in the investment community is that GME is no longer a MOASS (mother of all short squeezes) candidate; Ortex reports GME short interest at 26% of the float, versus 100%+ in January. Retail investors at r/wallstreetbets, the Reddit community that originally launched GME into the stratosphere 3 months ago, beg to disagree. One often proposed theory in WSB is that hedge funds are purposely misreporting their short positions and willingly eating the fine as the price of doing business. Another argument, advanced by KIA Investment Research as a blog post on Seeking Alpha, is that investment firms may be creating the illusion of covering their shorts by writing call options and buying synthetic long shares. Conspiracy theory or truth? Personally, I lean more towards taking the reported SI numbers at face value, a quick check with my broker verified that GME shares are available to borrow at 0.5% borrow rate, indicating that they are likely not in scarce supply (the due diligence reposted by KIA Investment Research also recommended this method of estimating immediate short interest).

This article was written by

Zero Sum Gamer profile picture
Investment style: buying great businesses at fair prices. Favorite sector: technology, due to massive competitive advantages, capital-light growth, cash rich balance sheets, and greatest potential to disrupt and cannibalize other industries. Time horizon: forever. Super interested in the rise of big data, quantitative investing, and how ordinary humans can still achieve alpha in a market increasingly dominated by machines

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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