GameStop was founded in 1984 in Dallas, Texas under the original name Babbage's by two former Harvard business classmates, James McCurry and Gary M. Kusin. The company began by selling Atari and Nintendo video games.
In 1996, Leonard Riggio dissolved Babbage’s and created Babbage’s Etc, appointing Richard Fontaine as chief executive and Daniel DeMatteo as chief operating officer and company president. Three years later, in 1999, the company launched its brand in shopping malls across 30 locations, and launched its website, GameStop.com.
It is the world’s largest video game retailer, and also specialises in gaming merchandise, consoles, and consumer electronics. As of January 2021, it operates 4,816 store locations throughout, the United States, Canada, Australia, New Zealand, and Europe under the Gamestop brand as well as EB Games, EB Games Australia, Micromania-Zing, ThinkGeek and Zing Pop Culture brand names.
The company’s loyalty rewards program, PowerUp Rewards, had roughly 42 million active members in February 2020, with at least 15.2 million of these members either trading an old game in for a new one or making at least one purchase during the same year.
In 2021, the company employed 12,000 staff (which was down 14.29% from the previous year’s figure of 14,000), and operated across the US, Canada, Australia, New Zealand, and Europe.
Net sales in 2020 totalled $5.09bn, up from $1.35bn in 2002, the year the company floated in New York.
GME stock overview
GameStop is listed on the New York Stock Exchange (NYSE) with the ticker symbol GME. In its first year after going public in 2002, the company had an average stock price of $9.56 with a yearly high of $12.1 and a year low of $4.57.
GME share price increased, on average 68% per year until 2008, when the stock declined more than 65% amid the financial crisis.
The company seesawed between profitable and non-profitable years until 2020, when the stock value grew by more than 685% from the previous year.
Why did GameStop stock go up in 2021?
Prior to 2020, the company had posted several years of poor results due to higher levels of competition in the marketplace. Market sentiment towards the company had turned negative, leading many traders to open short positions on the stock in order to profit from its declining value.
In January 2021, readers of WallStreetBets, a forum on social news site Reddit, saw an opportunity to boost GameStop’s share price by purchasing stock in large volumes at a low price. In fact, between the end of December 2020 and the end of January 2021, its shares increased in value by nearly 2,500%, taking the GameStop stock price from $30 per share to nearly $500.
This prompted traders who had shorted the stock to buy shares to hedge their positions in order to reduce the potential for large losses as the market moved against them. The rapid rate at which the WallStreetBet traders purchased shares meant that most short traders had little choice but to buy back GameStop shares at hyper-inflated prices of around 200 times what they had originally paid.
As a result of the stock’s short squeeze, several online trading platforms halted trading temporarily to allow the company’s share price and affected traders (mostly hedge funds) to recover, which elicited accusations of market manipulation.
Gamestop’s (GME) share price then began to decline rapidly. The stock lost 60% of its value by February 2021, wiping a reported $27bn from the company’s valuation. Over the following months, despite several resurgences, the stock has trended downwards from its January 2021 all-time high of $483 per share.