How Can GameStop Possibly Be Up 100%?

By Douglas A. McIntyre Published Jun 3, 6:40AM EDT

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How Can GameStop Possibly Be Up 100%? — © master1305 / iStock via Getty Images

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Investing in companies like GameStop Corp. (NYSE: GME | GME Price Prediction) is amazingly risky.
Potentially unknown investors driving social media can cause wild swings in the share price.

Before the market opened on June 3, GameStop Corp. (NYSE: GME) shares were up over 100%. Even if they trade lower during the day and the next day, it raises the question of how potentially unknown investors driving social media can cause such swings.

Keith Gill, aka DeepF—Value, posted a screenshot on Reddit, according to Bloomberg, “which shows five million shares bought at $21.27 per share and 120,000 call options worth $65.7 million due to expire on June 21.” The stunning thing is that it was just a screen shoot. There is absolutely no reason to believe it is accurate. The stock closed at $23 at the end of the previous day.

GameStop’s value has fluctuated over the past two months. At the end of April, it traded at $10, and it hit $64 in the middle of May. It collapsed to $18 late in May and traded near that price until the new 100% spike.

It is worth noting that GameStop’s financial situation is less than mediocre. In the most recent quarter, revenue dropped from $2.2 billion a year ago to $1.8 billion. Earnings did rise modestly, from $48 million to $63 million. It has only $922 million in cash on its balance sheet. After the 100% rise, GameStop had a $16 billion market cap.

Investing in companies like GameStop is amazingly risky. A trader can get in at relatively low prices and ride to the top as it jumps by double-digit percentages. That trader must time the stock sale almost perfectly to book a massive profit before shares collapse. Some investors buy at the peak only to book huge losses when the shares fall.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.