This huge disconnect between GameStop's stock price and how the company is actually doing has created one of the more bizarre moments in Wall Street's more than 200-year history.
Seasoned financial analysts say it is the performance of GameStop's business - whether it can sell enough games to pay its employees, make rent and cover the interest on its debt - that will determine where the stock ends up. In the nine months through the end of October, its most recent reporting date, GameStop had revenue of nearly US$3 billion, 31 per cent lower than in the same period a year earlier. Because of cost reductions, its loss of US$296 million was smaller than the US$492 million in the equivalent period of 2019.
Still, GameStop has its fans. RC Ventures, an investment firm headed by Ryan Cohen, the founder of the online pet products retailer Chewy, has in recent months acquired a 12.9 per cent stake in GameStop and outlined a plan in November to revive GameStop's business. Even analysts who think GameStop's stock has become a bubble said that the company has some things going for it. Mr Pachter, the Wedbush analyst, said that George Sherman, who was appointed GameStop's chief executive in 2019, had strengthened its finances, giving his team time to attempt a turnaround.
AMC, the movie theatre chain whose stock has also soared in recent days, sold shares last week, taking in cash that could help it weather the pandemic more easily.