GameStop’s Stupefying Stock Rise Doesn’t Hide Its Reality

February 03, 2021

Behind GameStop’s stock surge is the grim reality of its prospects: The video game retailer is floundering even as the industry around it is booming.

GameStop has been swept up in a battle between big-moneyed hedge funds betting against it and small investors trying to prop it up. That has caused GameStop’s share price to soar despite the shaky financials underneath.

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Analysts say GameStop could take advantage of the lofty stock price and do their own stock offering like American Airlines. The chain could use that money to reinvest in the business.

But given so much uncertainty, the question is: at what price?

“No one knows what the true valuation is,” said Alon Y. Kapen, a corporate transaction lawyer at Farrell Fritz. “And you don’t know when that window is going to shut.”

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