Why GameStop Stock Is Falling Today

What happened

Shares of GameStop (NYSE:GME) were down 4% in midday trading Friday on what seems to be recurring volatility for the meme-stock poster child. 

So what

Earlier this week, the video game retailer announced it had raised $1.1 billion by selling 5 million shares at an average price of around $225. As it tries to transition to a business model more focused on e-commerce, it has used the support of retail investors who are taking on hedge funds that short its stock to build up a financial arsenal.

Man holding head and looking upset while playing a video game.

Image source: Getty Images.

GameStop’s stock is up over 1,025% this year and stands more than 4,400% higher than it did a year ago when it appeared to be careening toward bankruptcy. But stock traders in internet chat rooms rallied around its shares, sending the stock soaring and allowing the retailer to bolster its coffers to effect the needed turnaround.

Now what

GameStop is going to be subject to wide swings in its stock price as this battle continues to play out between short-sellers and meme stock investors. 

Although there is a lot of risk, since it’s uncertain whether the video game retailer can successfully make the U-turn, it seems to have the best chance it’s going to have financially. Chairman Ryan Cohen has brought on some smart executives from Amazon, Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google, and elsewhere, suggesting that in addition to the money needed, GameStop has the brain power to accomplish the task as well.

READ:  3 Stocks I'm Never Selling

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/06/25/why-gamestop-is-falling-today/

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