GME Financial Conflict

• Financial conflicts can exist when 2 or more factions with opposing financial interests compete on a particular financial or market outcome
• There apparently exists an ongoing financial conflict over the share price of GME
  • One side, GME short sellers, also known as "shorts" or "bears", gains financially when the price of GME goes down
  • The other side, GME shareholders, also known as "bulls", gains financially when the price of GME goes up
• As the conflict has evolved, so too have the competing narratives put forth by both sides
• The conflict ends when one side capitulates, willingly, or because they can no longer sustain their position
• It remains unclear what specific outcome can be expected in either direction, and in what kind of time frame
• Amidst an ongoing turnaround, GameStop has significantly improved its financial standing and is at no risk of bankruptcy for the foreseeable future — GameStop is operationally profitable and has significant positive equity

For a period of time, approximately 2018 through 2020, GameStop was a struggling company in a weak position, and looked very much like it could be headed towards bankruptcy.

Some hedge funds opened GME short positions because they believed the company’s fundamentals did not justify its stock price and that its value would decline over time.

GameStop was widely seen as a struggling brick-and-mortar retailer in an industry increasingly shifting toward digital sales and subscription-based gaming services. This combined with declining revenue, store closures, and challenges adapting to new gaming trends made it an attractive target for short sellers.

Some hedge funds assessed GameStop’s financials and market position, and concluded that the company was overvalued and that shorting the stock could be a profitable strategy, marking the beginning of this financial conflict.

Of note, for a period of time, GME short interest exceeded 100% of the number of shares in the public float.

Prior to 2021, some keen investors observing GME, such as Keith Gill, saw the opposite view of GME short sellers, that GME was undervalued and over-shorted, and took a counter-position by investing in GME.

A social media phenomenon grew around Keith Gill's view of GME, and eventually hundreds of thousands of retail investors began buying shares of GME, driving the price up.

During this same time period, in late 2020, Ryan Cohen began buying significant amounts of GME shares, contributing to upwards GME price movement.

Eventually, the relentless buying pressure from enthusiastic retail investors culminated in the GME sneeze, a significant event which drew a large amount of attention towards GME and marked a turning point in the conflict.

As a consequence of competing financial interests, there are competing narratives around GME.

A general narrative based on a bear thesis put forth by bearish GME short sellers with a financial interest in the share price of GME going down is that GameStop is a dying brick-and-mortar retailer with an outdated business model, and is ultimately destined for bankruptcy.

A general narrative based on a bull thesis put forth by bullish GME investors with a financial interest in the share price of GME going up is that while GameStop was a dying brick-and-mortar retailer with an outdated business model, it is a company that is undergoing a turnaround and transformation, and is ultimately destined for greatness.

These two narratives contradict the other; they cannot both be true simultaneously. One side is necessarily more correct than the other, though, due to the nature of this conflict and the ensuing information warfare surrounding it, it is often unclear what the true reality is.

What is plainly clear is that as of most recently published financial results, GameStop is at no risk of bankruptcy for the foreseeable future. GameStop's Stockholders' Equity is higher than it has ever been, and the company is operationally profitable.

GME bears win when their opponents, the bulls, give up on GameStop and capitulate and sell their shares of GME. In such a scenario, shareholders have lost faith in the outlook of the company, sell their shares, and the stock price plummets. As the price goes down, the value of the short position held by GME bears goes up. In the best case scenario for GME bears, GameStop goes bankrupt and the stock gets delisted.

GME bulls win when their opponents, the bears, give up on their GME short position and close out of it. Alternatively, GME bears could be forced to close their position via margin call, which would produce the same outcome. In order for a short position to be closed, the holder of that position must buy shares in order to return them to the party that they originally borrowed them from. In such a scenario, short sellers are buying back shares of GME, causing the price of GME to rise, thus increasing the value held by shareholders.

In a 2025 interview with Charles Payne on Fox Business:

Oftentimes, GameStop is treated by the media with cynicism, negativity, and even plain dishonesty.

On rare occasion, however, media or media personalities acknowledge that there is actually more to GameStop than what is just superficially reported.

• "When asked about Gamestop i just say it is a controlled stock and not more than that. The haters know exactly what i mean"
  - Jim Cramer, July 6, 2022
• April 6, 2024: Reporting on GameStop's FY 2023 earnings, Reuters.com published an article titled: "GameStop saga ends. Winner: capital markets"
  In this article, the authors stated: "the beauty of a good trade is that there exists a winner and a loser; A thesis is tested, and one view will prevail. In this case, “shorts” were right. That leaves a lesson for those nursing dwindled bank accounts. The meme army may have lost, but perhaps next time will be clearer-eyed."