Gamestop is not a game-changer but gamer geeks still win if they lose

Gamestop is not a game-changer — even on Wall Street and certainly not downunder where there’s virtually zero prospect of it being replicated, says Terry McCrann.

A GameStop store in Culver City, California. Picture: AFP

Gamestop is not a game-changer — even on Wall Street and certainly not downunder where there’s virtually zero prospect of it being replicated.

Yes, it could also end in tears pretty much all round — although they will range from tears of pain to tears of joy maybe mixed with a bit of pain, and with the crocodile variety thrown in.

And with some — quite a few? — gamer geeks crying all the way to the bank.

It certainly has so ended already for the short-selling hedge funds, which have lost billions, whether measured in Aussie or Yankee dollars.

It’s been delicious. For once the “outsiders” have taken on the “insiders” and skinned them at their own game. It was rendered even better by the fact that the Wall Street insider establishment including, very much, the three supposed regulators, the New York Fed, the SEC (their equally hopeless version of our ASIC), and the NY Stock Exchange — were caught absolutely flat footed.

So we didn’t see them spring to “save” the hedge funds by moving to re-rig the supposed market on the usual utterly spurious grounds of a potential “systemic threat”. It was done and dusted before they could collectively woke up.

Even more deliciously, if only the hedge funds had hung on, they would have found their losses cut very substantially, as the GameStop share price came inevitably back towards — arguably it’s still not nearly there — earth. The Reddit-driven (and assembled) gamer-geek buying drove the GameStop share price to $US483 ($636), valuing the company at a breathtaking $US34bn ($44bn).

It’s now come down to a more terrestrial $122, valuing the company at “just” $8.5bn, as the short squeeze ran its course and the hedge fund buying back petered out.

But note that the price has been as low as $3.38 and the company’s value at just $180m in recent times.

While the $636 was clearly too (OK, way, stratospherically, too) high — but, who really knows in this time of global zero rates and multitrillion-dollar money printing — the $3.38 was arguably pushed too low by the aggressive hedge fund short selling.

Whatever, if only the hedge funds had held off covering their shorts — by their very own actions sending the price into the stratosphere, like an exercise in self garrotting — they could have been buying back in the $100s and perhaps even the sub-$100s, rather than the $400s and $500s.

The trouble is you — always — only find out after the event; the risk in not buying back when they did was the share price could have gone to $800 or $1000.

They weren’t facing “rational” buyers but an army of gamer geeks, who were quite prepared to spend $500, $1000 — as if they were buying a game — and simply not caring if they ended up with the digital equivalent of scrip wallpaper.

That’s why it was a “one off” even on Wall Street. The gamer geeks were emotionally invested in GameStop and they had the digital technical smarts to play out their feelings.

That’s also why the seemingly similar play into shorted silver fizzled out very quickly.

Nobody’s “emotionally involved” in some perception of the “right” silver price. Nobody buys silver with a mindset they’d be happy to lose their money, ending up only with some digital image of an ingot they briefly owned.

The insider establishment has switched to tut-tutting at how the gamer geeks could end up losing big time if the share price goes back to the low levels of 2020.

Yes true, but somebody has made the $7bn-$10bn that the shorters have lost.

Yes, they could have been (mostly) normal investors.

They could also have been smarter gamer geeks, selling into the desperate hedge fund short-covering buyback. And the shorters certainly ain’t getting their money back.

Originally published as Gamestop is not a game-changer but gamer geeks still win if they lose