Hacker News Reader

Comment by dehrmann | Hacker News Reader

I read the WSJ article on u/deepfuckingvalue, but I couldn't put together if he was behind the trade or if he genuinely thought GME was undervalued, started buying some a while ago, and became a wsb hero during the squeeze just because he happened to be there first, and someone else orchestrated the squeeze.

That article also felt like it missed some key reporting details, and I was surprised he talked to reporters, so I halfway wondered if he did have a larger role, but got this out there to shape the narrative in case the SEC comes knocking.

View on HN

If you look up roaring kitty on yt, you can see his thesis on gamestop atleat 6 months back, he bought in I think in 2019. The stock was more valuable than the price on a fundamental level then caught some huge investors, board change, better than expected sales due to the console cycle.

The analysts were also not understanding its potential and probably misunderstood greater online sales revenue as moving away from physical disk instead of just a huge growth of free games with in game transactions adding a larger share to the gaming revenue pie.

I've seen "The analysts were also not understanding its potential" a few times and this is mostly incorrect. I know there were large value funds who had looked at GameStop and there was another primary reason the stock price was so low: management.

Value investors totally understood that there was a well-liked brand here that still had huge cash flows. And they knew all the bear cases about the move to digital and the retail biz dying.

A main reason there were value funds who analyzed GameStop and came to the "neutral" conclusion was that the old management team wasn't making any big moves to even attempt to turn around the death spiral.

DeepFuckingValue and even Michael Burry were half-wrong in their original thesis: just using cash flow to do stock buybacks was not necessarily going to turn GameStop around.

It wasn't until Ryan Cohen got involved, got on the board, and started pushing for serious e-commerce and digital initiatives that the stock and story majorly turned around and caused the momentum trade.

GME was not undervalued. Its a dying company.

They sell physical copies of video games. In the ear of digital content, even worse companies are selling game passes - ie rent our game catalog for a month. This is literally Blockbuster vs Netflix of video games world.

The hedge funds were trying to prey on Gamestop's dying corpse, and WSB players figured out how to take advantage of it.

I think the reality is the WSB big guys needed to hype up the short squeeze and 'sticking to the man' to cause the boubble. And it worked out great.

That in itself is not bad, but it will become a problem when the main players start to slowly exit, the greedy middle will have (what is it called) stop sells set up in case of fall, and then it will quickly collapse and who will be left with their pants down waking up in the morning to see its all gone?

The "I am holding till zero" crowd.

The idealists are always taken advantage of by the shrewd leaders of any movement.

If you take part, just pay attention to it, and exit or at least take some profit when you start seeing signs of it.

It being a dying company doesnt mean it wasnt undervalued.

Gamestop was being sold below its Net Current Asset Value, that is, if you took all of its cash in the bank and used it to pay off all of its debts, you would have more cash in hand than if you had not bought gamestop.

Oh, I see. I stand corrected then.

Not unusual for a company expected to lose money. Yeah, sure, I'd pay $90 for a bag of 100 $1 coins, but not if there's a hole in the bag and half are going to spill out before I get home.

Digital content is king, but physical copies are always going to have a market- collectors do want physical boxes for their display shelves. Though certainly the company does need to pivot into something bigger.

I'm not sure if the comparison to Blockbuster is as comparable, as renting media probably has different dynamics from buying media. And games, which cannot be rented except in a few specialty subscriber services such as Apple Arcade, will have different dynamics from movies or shows that can be rented.

I think amount of physical games is declining in real terms, though. I actually buy a lot of them, as one of my weaknesses are portable console systems. I've noticed that new releases are much harder to find in general now; Limited Run's entire business model is based on the fact most smaller games are digital first or digital only.

Also no, the current decisions for the retail stores make me feel like they will lose a lot of goodwill if they transition. The stores barely keep any stock on hand at all, and are increasingly being emptied of goods. I'm legitimately worried they will shutter them all soon; 3 local gamestops where I live have closed in a year or two.

I've actually seen ideas brought up that they don't necessarily have to (only) transition to digital. They already are planning to transition to selling PC parts at their physical stores; I've seen people suggest they also sell physical board games as well, which has had somewhat of a renaissance this past decade. I've definitely seen the remaining big box bookstores (pretty much Barnes and Noble at this point) move out of their core content in a similar fashion.

GameStop could also take advantage of physicality and become community spaces for eSports events or even tabletop gaming, collectible card game tournaments, etc. Basically become general "geek" stores and not just gamer stores.

He genuinely believed it was undervalued, and it was at the time. There is a lot of opportunity to grow in different segments, from esports to PC Building (there really is a shortage of Microcenters and Newegg shops compared to Gamestop shops).

It was somebody else who figured the short squeeze was possible during mid September.

> It was somebody else who figured the short squeeze was possible during mid September.

That was this post: https://old.reddit.com/r/wallstreetbets/comments/ip6jnv/the_...

He even predicted the $400 price target as the time to cash out of the squeeze.

If you watch his videos from this summer, he genuinely believed they were undervalued, and would talk for hours about why - and essentially became a laughing stock for putting so much behind a failing bricks'n'mortar highstreet retail.

I'm not even sure this is a redemption story - just a plot twist that made a funny story, much funnier.

He did good fundamental analysis months ago on why it was undervalued [0].

[0] https://www.youtube.com/watch?v=GZTr1-Gp74U

Reply on news.ycombinator.com