GameStop Is Sitting Out the Meme Stock Frenzy. This Could Be Why.

Retail investors own much of GameStop stock, making it more difficult for short sellers to borrow. (Michael M. Santiago/Getty Images)

GameStop shares are missing the latest bout of meme-stock trading.

They were little changed in early Friday trading, and have posted only modest gains over the past two weeks, even though renewed meme-stock mania has triggered a series of enormous surges and declines on Wall Street.

Kohl’s shares have soared nearly 43% over the past week alone, while Opendoor Technologies has rallied 210%, and fallen 29%, over the past two weeks. Krispy Kreme’s 10-day gain is around 40%.

The fact that GameStop is absent from the recent revival in meme stocks—the term describes shares whose movements are largely powered by retail investors and aren’t tied directly to company fundamentals —has been notable. The videogame retailer, based in Grapevine, Texas, was effectively patient zero when meme stocks took off, rising nearly 700% over just a few weeks in early 2021.

GameStop wasn’t having a great deal of success as a bricks-and-mortar business back then. The pandemic meant fewer people were visiting stores, and technology made it possible to buy games online, so investors sold the stock short, betting that the price would fall. Retail traders, inspired in part by a then unknown investor on Reddit’s WallStreetBets discussion group called “Roaring Kitty,” bought the stock, sending the price higher and forcing the short sellers to buy to close their bets.

That led to a relentless upward spiral in the stock price.

Still, the group reported annual losses totaling around $910 million from 2021 to 2023. It nudged into profit in 2024, shortly after Ryan Cohen, an activist investor and retail-trading legend, took the reins as CEO.

Cohen’s leadership now, in fact, may be the principal reason that GameStop hasn’t found itself swamped, in either direction, by this summer’s meme-stock renaissance. The former CEO of Chewy.com has made a series of attempts to redirect the group’s fortunes, using the stocks’ elevated value and convertible-note offerings to raise fresh capital along the way.

The most successful of those, however, has been the most recent. GameStop began adding Bitcoin to its balance sheet earlier this year, and now owns around 4,710 of the world’s biggest digital currency. At current prices, that carries a value of around $550 million.

Cohen called the holding “a hedge against inflation and global money printing” and said he could add more over time.

The group’s balance sheet is even more impressive, with cash and marketable securities valued at around $6.4 billion, or 85% of its total assets, as of May 3, the end of its fiscal first quarter. Cohen told CNBC last week that the tally of cash and securities has risen to around $9 billion.

“We’ve gotten our costs under control and we’ve changed the business from a reliance on hardware and software to a significant focus on trading cards and collectibles generally,” he said.

The company’s broader business resilience, however, isn’t likely what’s keeping it from getting pulled into the current meme-stock frenzy.

Most GameStop shares are held by retail investors, making them more difficult to short. Investors betting against stocks must first borrow them, likely from a passive investor, to execute a short sale. Many retail investors aren’t aware that they can lend their stocks, and others don’t know how to do so.

Levels of short interest, it has been argued, are the most important element in identifying the next meme-stock target.

GameStop’s cash pile is another reason investors might avoid shorting the stock. Cohen has said he’ll deploy that capital “responsibly, as I would my own.” That could include share buybacks, which would immediately punish any investor betting against its shares.

That isn’t to say Cohen is above tapping into specific meme-like zeitgeist. Earlier this month, the billionaire investor raised $250,000 from auctioning a stapler and a Nintendo Switch game console, damaged during its launch in early June, on eBay.

The cash was donated to the Children’s Miracle Network Hospitals charity.

Cohen also suggests he is willing to defend the retail investors that have piled into his company’s stock over the past five years.

“Even from when I made my original investment [in 2020], I was fascinated at how much how much, um, hatred there was towards an investment in GameStop,” he told Fox Business last week.

“I think its un-American to bet against business,” he added. “I don’t really have much respect for short sellers and someone who’s ultimately not smart enough to find someone successful [and] have to bet on someone’s failure.”

Corrections & Amplifications: GameStop completed a four-for-one stock split in July 2022. A previous version of this article incorrectly said it was this month.

Write to Martin Baccardax at martin.baccardax@barrons.com