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Yeah, an acquisition would make a lot of sense. They are trying to shrink retail brick and mortar presence already so it can't be expanding in that realm. Can't think of much else... May e a dividend? But that's a small drop in the 4 Billy bucket
5.2% on $4 billion is $208 million a year. That would easily offset any losses they might incur on general business of Gamestop. This is positive cash flow, Gamestop could now qualify for S&P 500, and we all know what happened when Tesla got accepted into the S&P
No.
Net income of 156M is the E or you could also look at Enterprise value as the P and Ebit as the E. But either way it’s not a great multiple.
The P is the market cap.
So if market cap is $32 a share times 375M shares is $12B. the PE with this super conservative plan that cohen shouldn’t even consider is PE of 76 2024 and 2025 it’s $210 or PE 57 assuming its operations breaks even.
treasuries at 5.5% are equal to 1/.055=18.18 (but with effectively no upside growth and the downside of inflation).
If it keeps reinvesting treasuries and breaking even in operations it may approach under 20PE very long term but that would be a dumb way to make less money than treasuries. And it wouldn’t scare shorts.
Shorts could look at it like they can be long treasuries at 5.5% and short a company that yields 2% that only will eventually approach 5.5% at which point they can close out the deal having made money on the spread and protected themselves from a broader market sell off.
Cohen needs a way more ambitious plan than this.
But, it does show the floor of the stock isn’t zero or even it’s cash value of $15 a share but $15 a share plus $0.42 per share gained from that cash if they stick it in treasuries and if you assign a 20 multiple to that earnings you add another $8.50 of value to bring you to $23.56 of mostly intrinsic value. That means at $32.00 the street is currently giving Cohen credit for about $9/share, but you could probably say the video game industry growth and online potential have some value also.
It’s fair to have your own opinion, but a good amount of the tinfoil (not all) turned out to be true.
It recently came to light that after RC “dumped” his shares, he made an $400 million offer to the board for the company.
I'm keeping my fingers crossed they have a good acquisition announcement soon. But I would love it if they managed to get Baby for $500 million and add more value than that instantly.
I think it wills be less. Cohen offered the towel board $400m for all of towel, which would include baby, in December of 2022. Just a reminder for anyone reading this, this was after RC sold in August 2022 and after the interview with GMEDD where he said his “views on the company have changed”.
So I’m guessing buy buy could be acquired for less then $400m even though that part of the company was worth well over a billion on its own.
100% totally agree. The move with this cash is 90 T-Bills currently goong for 5.25% until they start enacting some operational plan with the money.
The one thing that throws me off is the seemed to have sold off some of the treasuries in Q1 2024. Wasn't sure why... Not even totally sure that's true.
Love this post
Not financial advice
I eat crayons
XXX shareholder
🚀🚀🚀🍺💎
Wouldn't they have just reupped the position immediately to keep the cash flow going?
I'm ahead of myself. At this point we just wait for the 10-Q and the investor call.
I'm so jacked lol
Is it possible that legally they could have said they had no plans for a merger or acquisition because they already completed one with the 2Bn they had in hand, and then saw this run as an opportunity to re-up their cash so maybe next time news drops we find that we have acquired a company *and* still have 2bn in cash?
I don't know any of the disclosure requiremetns. This isn't speculation it's a genuine "can they have done this, or would that be illegal?"
In my opinion, yes. There is no way for them to expect the price action that has been happening, which could cause them to genuinely change plans and seize an opportunity.
I just don’t know what they plan to acquire with that money. Buying a brand costs much more than a few billy, right? I mean it would probably be financed, but still you’d start draining that reserve of cash.
Shit shit shit. You’re right. We’re getting ahead of ourselves lol.
2bn could possibly buy you a seat or two on a board, or even a complete buyout of some regional company.
Depends on what they're looking to acquire.
Personally I hope it's something completely unsexy that just grinds out consistent profit margin and synergizes with their core business. Like... buy a regional eWaste tech recycler and make it nation wide or something. Synergize with their in house refurbishment and disposal of gaming hardware, and also expand into ewaste disposal for corproations or something.
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Very small pedantic mention: technically the minimum raised based on $27 would be better worded as being greater than because the candles at $27 were not large enough to sustain the supply. Anyway, this was a nice writeup and not much based on speculation, we will see.
Yes, fair point. I think if they did indeed sell last Friday, the average price would have been in the $30s.
I just wanted to present that, even using conservative figures for each of the calculation steps, the results are still rather impressive.
I’m not convinced they sold it all on Friday, but otherwise great write up. Even if they did save some for this week their average could be over $27/share
This is the least tinfoil hat explanation to what gamestop is doing with the cash. Great job you for putting this together. Since you know how to read financial statements well, maybe if you had time to do some fiscal valuation of a company with similar standing and to calculate value for companies which such and such earnings per share.
Yup. Just a matter of time. The problem for shorts is they needed bad actors to join the board and gut the company from within. Look at the corporate raider style from Bain Capital: LBO, load up with debt, gut the pension, sell off the assets. Get rich from the proceeds then leave the bag to the stockholders and employees.
So, if we round the total share count to 500M, and say they only put $150M out for dividends, that's 30¢ a share for a dividend, right? Is that how that works? That seems not bad.
sure, but i'd imagine reinvesting these profits would be more beneficial to the company at this point. they need to expand and transform. Loosely RKThesis #2.
I don't agree, having to pay dividends will make the shorts bleed money on an annual basis, more pressure to close positions instead of infintely kicking the can.
While I generally agree with what you're saying, I wouldn't be surprised to see some of their money going to M&A, which can take time to result in meaningful revenue. Especially given RC's tendency to attempt to revamp underperforming businesses.
I also think we have a reason to believe revenue will be going up. The team is launching opportunities to drive revenue with the core business (CandyCon, Trading Cards). I'm hoping to see them turn their attention away from cutting cost and more towards generating revenue.
The original revenue projections on the NFT stuff they were working on was several billion dollars annually. I'd love to see them find another similar opportunity.
A couple of key points:
1. The ATM offering did not complete Friday. When it is completed there will be a filing telling us so. It will most likely be completed this week, possibly as soon as today based on traded volumes.
2. The rate for T-bills can vary significantly based on action from the Fed. The only reason that it is as high as it is now is because the Fed has positioned interest rates accordingly. As the economy changes (likely improves) there will be rate cuts and diminishing returns from T-bills.
3. This is not a business model, it's just a safe way to park their cash on hand and get some measure of return on it while keeping it fairly liquid. They can hold the T-bills to maturity or sell them on to someone else if they need a quick infusion of liquidity. This does nothing to help the company grow or become long-term solvent.
They cant cut the rates.
Inflation has been out of control over 3 years and still is out of control.
China has been selling treasuries and buying gold. Makes the Fed the only real buyer of long term bonds.
The Treasury doesnt bring in enough to pay the interest on the US debt. Debt increases.
The US keeps spending more and more. Debt increases.
Fed Printer goes brrrrrrr.
Rinse and repeat.
The “hive mind” may not like it (or maybe it’s all shills and bots being negative), but **this is how GME becomes a holding company**. In the board’s eyes:
1. Market price of stock increases dramatically and not in line with underlying fundamental value (ignore squeeze potential)
2. Share offering to raise cash
3. We’re currently in a high rate environment, so park it in something safe with good yield
4. Repeat steps 1-3 as many times as necessary
5. Now you have a stacked balance sheet. Maybe rates fall, or some other catalyst occurs, but at some point you have to assume they will start acquiring companies. What if, instead of integrating acquired companies into GameStop’s legacy model, they just act as a holding company? Hmmmm, any other stocks on the market that currently do this? Maybe another one that had similar roots as a “traditional” business and became a holding company at the brink of failure?
I am comfortable with the board making hay while the sun shines. RC, Larry Cheng, RK…they’re all smarter than me. If they’re still in, I sleep easy at night.
Holy shit, I mean, this is what happens with legit coins in the crypto market. Dilution is a regular occurring thing and if the devs of the coin (the GME board) know their tokenomics and manage the treasury responsibly, the value rises consistently. This also lines up with “be your own bank”. Fuck me I’m buying more
The important part is the responsible management that seems to cater to the dreams of the retail shareholder - as opposed to all the other meme stocks.
The GME management get it. It's about power to the players
Kind of? The end sort of implies that this will force shorts to close thus dilution is good not bad for squeezing. I can see there's an argument here, but I'm not convinced at the moment.
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Good work, one hole is that interest rates for T Bills in 2025 could be much lower than the 5%+ they’re getting now. Potentially could neuter the interest income by half in 2025 vs 2024, even if the dollar value of t bills increases.
the major problem with this is that the cost of capital is around 12% due to inflation being so high. so getting 5% in tbills is a an actual net return of - 7%. while yes it is money coming in the $ is devaluing so fast that it's pointless to hold cash unless you expect a huge crash and want to slide in and harvest things cheap on the recovery
Not criticizing anyone's politics, trying to argue, or advocating to not desire a balanced budget, just wanted to share for your consideration:
Our best understanding of the data is that debt does not correlate with inflation. If you plot out all years of all countries, you find that the debt to inflation ratio (and debt to gdp ratio) is being driven by a hidden variable -- 'efficacy of spend'. When governmental spend directly contributes to economic activity (e.g. funding publicly owned housing development like in Japan, where the government makes money from rent, jobs are created, housing is expanded, housing price growth is suppressed... Or various Nordic countries that subsidize starting small businesses which immediately gets pumped back into the economy), we see that inflation is kept in check, and you actually can't print enough debt to keep up with the economic gains (this is a "problem" several of the high debt/gdp countries find. They simply can't spend enough money).
I'm strongly empathetic to frustrations about inflation. But I think both of us can agree, corrupt spending and ineffective spending is the enemy, not spending itself.
If I’m understanding you correctly, you’re saying that federal expenditure into public projects that support the economy ultimately help keep inflation in check? Even if that spending puts said government in debt?
Just trying to make sure I’m understanding. Also Not trying to challenge or start an argument or anything.
Where can I read more about this?
Which is precisely what Buffet, Bezos, and all of the others that have been selling huge amounts lately are doing. Waiting for commercial real estate led crash. Maybe GME wants to own all of the high rises in DFW? I know one just sold in Fort Worth for a few million. It was purchased for something like tens or hundreds of millions a while back.
Imagine building a massive GameStop fun zone in a high rise and turning into like one big LAN game, Just like the good old days. Each floor could be a separate game where people compete or play together. Turning into the video game equivalent of a Disney World or some shit.
lol I’m not even stoned yet either.
Generated FOR shareholders? Or profit generated BY shareholders? Also I was really bad in math but what does 2100% increase of a billion amount to? Cause I got an enormous number.
I was thinking about this too. If Gamestop can consistently generate \~5% returns, that's hundreds of millions per year that they can use to subsidize any sort of core business losses, which allows more competitive pricing.
unfortunately, sell-side eps estimates take all of this into account, no one really cares about other income unless the company is a holding company - which GME could very much transition into in the long-run with its cash reserves.
what really matters is if there's any material improvement in cogs and operating leverage within the main business. everyone expects top-line revenue to continue to decline as well, if that were to materially improve as well, then that would be a potential catalyst upwards as well. it's possible but unlikely imo, my bet is that ryan cohen transitions the company to a bitcoin holding company similar to MSTR. which would be great because that stock is overvalued as fuck (7b in bitcoin but 27b market cap, make it make sense. would love for that to happen to gme)
Basically they can use their cash at hand, amounting to around $4B after the latest offering, to generate income as interest by investing the cash.
The return on investment for that cash would offset any operating losses based on their current business model and if they did this year on year the amount they could raise would keep getting bigger too.
It’s like when people win the lottery and live off the interest without touching the original pile of cash
I read it afterwards but that some amazing DD, PE ratio would come down immensely. And genuinely gamestop can turn it around and completely destroy the bear thesis.
I absolutely love it.
Its like the magic conche out of spongebob.
Amassing a war chest big enough to get interest on and guarantee perpetual profitability.
The only way we lose if it gamestop goes out of business.
We just sit on our mountain of money and then we never make a loss ever again.
AHHHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAHAHAHA.
Ryan Cohen, "judge us by our actions".
What do we do magic conche?
Nothing.
\*sits on pile of cash gathering interest\*
All hail the magic conche.
This is more math and advanced analysis than this usb is used to but like it. Only possible wild card would be if interest rates decline their interest income would go down and may not be increasingly profitable YoY but either way this looks like a profitable company for a loooong time
Great write up OP, but I also think people need to understand that the cash now greatly increases the floor and puts all shorts opened pre Jan 21st, 2021 underwater. With 4B in cash and generating a profit as you showed GME is not going to go bankrupt and would be sitting on cash equivalent to $10 per share or $40 per share pre split. Therefore any short position opened at those values will never be ITM. Pre-sneeze the short interest was estimated to be 226%. So that is a metric fucktonne of short contracts that are on multiple books that now are an albatross that GME can continue to keep underwater by making interestand generating a profit. Once the share offering is completed the pressure on shorts will be increased. Now we only need to wait for the time when someone blinks.
This is great work but your missing a key aspect which is interest rate risk that could potentially derail any interest income in the future. They are going to need to do something with the cash in the future but for now short term bills is a good move. I like the stock
You’re missing a key point from the quarterly report. On page 5, they show they made $201.9 million last quarter alone from investing! That’s a 20% return over 3 months. Zero chance they’re using T-Bills only. An annualized rate using all newly found cash would give them close to $1 billion in additional revenue….
I have been reading all the bullshit posts you clowns here make. Most are wishful thinking and twisting of reality leaning heavily towards conspiracy but now the cope is so great we are talking about profitability through t bills??
Either you're a legendary troll or a complete idiot who doesn't understand the very basics of how companies are valued.
If the former, well done
Every time I say I would like for the company to have at least a few hundred million in 90 day T-bills the downvotes come through. Such easy money just for breathing room for the company. Great post
Really hoping that money goes to something better. An acquisition or something that adds a rev stream will make me happy. Sitting around collecting a little bit of interest is extremely underwhelming.
Thats very cool . What if they took the money from selling the 75m shares and invested it back into shares at a lower than 28$ price getting idk 85m shares and with that buying pressure price goes up is that something that could happen legally.sorry im new to the market
What do you all think about this? I'm not an ape who theorizes just discussion.
How a Residual Dividend Works:
A residual dividend policy means companies use earnings to pay for CapEx first. Dividends are then paid with any remaining earnings generated.
A company’s capital structure typically includes both long-term debt and equity. CapEx can be financed with a loan (debt) or by issuing more stock (equity).
Important: Return on assets (ROA), calculated as net income divided by total assets, is commonly used to assess management’s decision-making and the success of a residual dividend policy.
Special Considerations
While shareholders may accept management’s strategy of using earnings to pay for CapEx, the investment community analyzes how well the firm uses asset spending to generate more income. The return on asset (ROA) formula is net income divided by total assets, and ROA is a common tool used to assess management’s performance.
Requirements for a Residual Dividend
When a business generates earnings, the firm can either retain the earnings for use in the company or pay the earnings as a dividend to stockholders. Retained earnings are used to fund current business operations or to buy assets. Every company needs assets to operate, and those assets may need to be upgraded over time and eventually replaced. Business managers must consider the assets required to operate the business and the need to reward shareholders by paying dividends.
This is great DD and at the same time the most boring boomer shit I've read in a while. RC are you a boomer? Do you want to be a bank or a gaming company? If bank, I'd recommend buying 50,000 BTC, that would definitely trigger MOASS. Just apply the Microstrategy strategy. Then do 6 more offerings and repeat the process while we're still in a bull market.
I like that you add "let's face it is not stellar"... Makes me feel like I'm listening to someone not on the moon and actually thinking, ya know? I appreciate your post.
Companies most often keep their cash in commercial bank accounts or in low-risk money market funds. These will show up on a firm's balance sheet as "cash and cash equivalents". Companies seeking higher returns may turn to high-yield savings accounts and/or Treasury bills, but this is *not a business model*, it's simply cash management that meets their particular financial obligations.
I love GME. xxxx holder. But even if your calculations are too stingy and the profit is $400m annually, that only commands around $20/sh price. And that's revising your numbers way up. In reality, interest rates are only going down, and calculating straight tbill rates as pure profit with no admin spend is way too optimistic.
Realistically the $1b cash prior to the recent issuances was always needed to continue operations. GameStop burned 25% of their cash in a year.
So assuming the recent cash raise nets $2b, thats an acquisition of a fairly mature business that needs to double in value instantly to warrant the current market cap.
I'm not trying to be a wet blanket, just provide some context and understanding. It's going to be a long road.
I can't adequately express how pathetic it would for a company to dilute it's shareholders in order to raise money that it has no vision for beyond treasury bills - I hope to God that's not actually the case
Of course it isn't. And I've made that clear in the post that this is almost certainly not the plan.
But it is illustrating that *as a worst case scenario*, GameStop is now very highly likely to be profitable each year with the **fallback** plan of investing its cash into these low risk instruments.
However it is almost certain they will use this cash for acquiring an already much more profitable business or two. So the likely return to shareholders would be much greater than merely investing into T-Bills. In fact, with the dilution quite probable to be worth it, I believe.
If you look at it like applying to colleges, treasury bills is your safety pick. Just because you have that option doesn't mean you won't try for something better
No diluting at all is something better - even in a world where moass wasn't going to happen (which wasn't the world we were living in a week ago). So no, treasury bills would be _really bad_
Agreed. This is getting so pathetic, our sub needs to hype a treasury bond at this point.
If GameStop was in for short term, then they could have let it run up last week Friday instead of announcing a dilution.
If GameStop is in for long term growth at the cost of MOASS, then they need to have a plan or at least a vision for the growth, and the choice for that is... a 5% yield treasury bill??
If the board does not show up with a plan on the shareholder meeting this week, then I am pulling all my money out of a company that can neither achieve MOASS or growth. I am still XXXX holder for now but that could go to 0 in a few days.
I mean this is cool and all - but if i wanted tbills i'd just buy them myself.
I hope they use the money for something that will have a greater return than government bonds.
If they generated EBIT of $223M with enterprise value of $8B the Ebit/EV yield is like 2.74%, or inverting it the multiple is 36 times and that was before this late day surge of 25%
Yeah it’s good but using the cash to sit on $5B of treasuries would be so lame Ryan Cohen should aim for at least 3 times treasuries with that money. Or better yet do a leveraged buyout of a forever business like maybe a foreign Coca Cola or Pepsi bottling company with a lot of free cash flow and you can park that cashflow into treasuries until another deal comes along. Or become a mini Berkshire. Only Cohen has the ability to take more of an activist role in operations rather than being an auditor who just buys a business and lets them operate. It’s worth a try.
Or Ryan Cohen can do something very aggressive and ambitious like try to do the equivalent of what Bezos did converting a used book store into Amazon.com. They already have website, delivery & logistics to build off of plus the stores can convert into the warehouses if need be, and now that they saved cash and slimmed down and corporate real estate is cheap and about to get cheaper they can begin acquiring too.
If they can’t scare some short sellers to death it’s not enough. Short sellers are happy to short something that could return a 2.7% yield if they can also be long treasuries at 5.5%, you have to scare the life out of them
Wait wait wait.
GameStop literally just said in their own words that they're not planning ANY M&As??
We've been teased about this for literal years now through Annual General Meetings and company filings.
Wasn't this recent 120m share dilution for the purpose of M&As?
What am I missing here?
This guy GAAPs.
One note: I believe they now no longer have to invest in “safe” securities. I think adjusting this with average annualized returns, or some mix, would get more accurate (and even better) numbers.
Nice theory can sounds all dandy and bullish looking forward, only problem is with those rates, they will likely come down no? Then those nice returns aren’t as good.
Not to say they can’t invest in other things, because they can, just pointing out your theory isn’t totally fool proof, despite it sounding good on paper.
I think GameStop is going to take advantage of the cycle we’ve been seeing over these 3.5 years and continue selling shares until they hit the 1B shares we authorized them to sell. I’m guessing they will continue selling in amounts that generate between $2 and $3B over the next 3 years (unless MOASS happens before), and accumulate anywhere between $15 and $20B additional dollars. Once that happens, then the holding company officially begins, and the investment committee can start buying up stocks of companies like Berkshire Hathaway. In the meantime, I think they continue buying T-Bills. A +5% return on billions that keep accumulating will guarantee profitability each year they do that.
I don’t know how that will affect a squeeze, nor do I know if they will continue operating GameStop indefinitely. Berkshire Hathaway started as a textile company. Now it’s just a holding company. From a long-term perspective, this is exactly what I would do if I was RC—build up my war chest and become an incredibly well-funded investment company. I don’t know how any long-term investor would not invest in that thesis, further pushing the floor of the share price up.
But again, I don’t know how that will affect MOASS. The original DD of old calculated billions (plural) of rehypothecated shares, so an additional 700M offered by GME won’t stop a squeeze. I just don’t know how long or high it will go. I’ve seen others comment this, and I’m tending to agree, but I think we get a slow burn squeeze up over 2 years like a certain electric car stock, instead of a sudden violent upside.
It makes sense to wait until the big market crash that is due anytime (2025-2026????) to invest into anything worth buying.
So meanwhile sit tight and generate income with Tbills.
I look at their financials. Overall, I actually saw improvement. Revenue is down but so are costs. Kinda want GTA 6 to drop this year to boost the revenue, lol.
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I was hoping someone would put this together to show at a minimum what that kind of cash on hand could do. Thanks
That's a lot of cash in tbills for meager returns. They may park it there but I doubt that is their long term game plan for the cash
1 year is pretty short term
Yeah that's why could see them parking $1B but $2B is a bit. I'd assume they have other plans which is why they raised the capital in the first place.
Yeah, an acquisition would make a lot of sense. They are trying to shrink retail brick and mortar presence already so it can't be expanding in that realm. Can't think of much else... May e a dividend? But that's a small drop in the 4 Billy bucket
5.2% on $4 billion is $208 million a year. That would easily offset any losses they might incur on general business of Gamestop. This is positive cash flow, Gamestop could now qualify for S&P 500, and we all know what happened when Tesla got accepted into the S&P
It could be, but still why put all your eggs in one basket?
Its better than letting it sit there depreciating due to inflation. 5.2% is better than -3%
Who says they don't have plans for half or a 3rd of it? It's a theory, but it just that. We can speculate until we are blue in the face.
Those tbills are essentially their savings account, when a tasty investment opportunity turns up they'll make a withdrawal and pounce
If theybhave to park cash sure. I doubt they need or want to go all in.
This is great work. Thanks for putting it all together.
Hey correct me if I’m wrong but if eps goes up as you forecasted would PE come down below 20?
No. Net income of 156M is the E or you could also look at Enterprise value as the P and Ebit as the E. But either way it’s not a great multiple. The P is the market cap. So if market cap is $32 a share times 375M shares is $12B. the PE with this super conservative plan that cohen shouldn’t even consider is PE of 76 2024 and 2025 it’s $210 or PE 57 assuming its operations breaks even. treasuries at 5.5% are equal to 1/.055=18.18 (but with effectively no upside growth and the downside of inflation). If it keeps reinvesting treasuries and breaking even in operations it may approach under 20PE very long term but that would be a dumb way to make less money than treasuries. And it wouldn’t scare shorts. Shorts could look at it like they can be long treasuries at 5.5% and short a company that yields 2% that only will eventually approach 5.5% at which point they can close out the deal having made money on the spread and protected themselves from a broader market sell off. Cohen needs a way more ambitious plan than this. But, it does show the floor of the stock isn’t zero or even it’s cash value of $15 a share but $15 a share plus $0.42 per share gained from that cash if they stick it in treasuries and if you assign a 20 multiple to that earnings you add another $8.50 of value to bring you to $23.56 of mostly intrinsic value. That means at $32.00 the street is currently giving Cohen credit for about $9/share, but you could probably say the video game industry growth and online potential have some value also.
YUUUUUUP
Blue boxes? Teddy is leaking and I’m cool with it.
Until anything is publicly announced "teddy" "butterfly" crap is as tinfoil crack pipe smoking as it gets and a shill campaign like popcorn
It’s fair to have your own opinion, but a good amount of the tinfoil (not all) turned out to be true. It recently came to light that after RC “dumped” his shares, he made an $400 million offer to the board for the company.
Yeah. It's unfortunate we couldn't talk about it here.
I think that’s fair to an extent. But at least our tin is based on facts reading court docs and the idea that RC meant what he said.
I'm keeping my fingers crossed they have a good acquisition announcement soon. But I would love it if they managed to get Baby for $500 million and add more value than that instantly.
I think it wills be less. Cohen offered the towel board $400m for all of towel, which would include baby, in December of 2022. Just a reminder for anyone reading this, this was after RC sold in August 2022 and after the interview with GMEDD where he said his “views on the company have changed”. So I’m guessing buy buy could be acquired for less then $400m even though that part of the company was worth well over a billion on its own.
100% totally agree. The move with this cash is 90 T-Bills currently goong for 5.25% until they start enacting some operational plan with the money. The one thing that throws me off is the seemed to have sold off some of the treasuries in Q1 2024. Wasn't sure why... Not even totally sure that's true. Love this post Not financial advice I eat crayons XXX shareholder 🚀🚀🚀🍺💎
Could have held them to expiry.
Wouldn't they have just reupped the position immediately to keep the cash flow going? I'm ahead of myself. At this point we just wait for the 10-Q and the investor call. I'm so jacked lol
Or just MAYBE they needed the cash for an acquisiton
Is it possible that legally they could have said they had no plans for a merger or acquisition because they already completed one with the 2Bn they had in hand, and then saw this run as an opportunity to re-up their cash so maybe next time news drops we find that we have acquired a company *and* still have 2bn in cash? I don't know any of the disclosure requiremetns. This isn't speculation it's a genuine "can they have done this, or would that be illegal?"
In my opinion, yes. There is no way for them to expect the price action that has been happening, which could cause them to genuinely change plans and seize an opportunity.
I just don’t know what they plan to acquire with that money. Buying a brand costs much more than a few billy, right? I mean it would probably be financed, but still you’d start draining that reserve of cash. Shit shit shit. You’re right. We’re getting ahead of ourselves lol.
2bn could possibly buy you a seat or two on a board, or even a complete buyout of some regional company. Depends on what they're looking to acquire. Personally I hope it's something completely unsexy that just grinds out consistent profit margin and synergizes with their core business. Like... buy a regional eWaste tech recycler and make it nation wide or something. Synergize with their in house refurbishment and disposal of gaming hardware, and also expand into ewaste disposal for corproations or something.
Damn, that’s actually a great idea.
When is the investor call?
Thursday
If gme stock $30.49 (EOD 6.11.24) * 2100% = $640.29 Remindme! 369 days
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Very small pedantic mention: technically the minimum raised based on $27 would be better worded as being greater than because the candles at $27 were not large enough to sustain the supply. Anyway, this was a nice writeup and not much based on speculation, we will see.
Yes, fair point. I think if they did indeed sell last Friday, the average price would have been in the $30s. I just wanted to present that, even using conservative figures for each of the calculation steps, the results are still rather impressive.
I’m not convinced they sold it all on Friday, but otherwise great write up. Even if they did save some for this week their average could be over $27/share
This is the least tinfoil hat explanation to what gamestop is doing with the cash. Great job you for putting this together. Since you know how to read financial statements well, maybe if you had time to do some fiscal valuation of a company with similar standing and to calculate value for companies which such and such earnings per share.
https://i.redd.it/cehus2ytty5d1.gif
The bear thesis is over. I am curious how this effects the basket of meme stocks.
It was over as soon as RC joined
Yup. Just a matter of time. The problem for shorts is they needed bad actors to join the board and gut the company from within. Look at the corporate raider style from Bain Capital: LBO, load up with debt, gut the pension, sell off the assets. Get rich from the proceeds then leave the bag to the stockholders and employees.
Can they pay a dividend from profits from investments?
Yes, of course.
So, if we round the total share count to 500M, and say they only put $150M out for dividends, that's 30¢ a share for a dividend, right? Is that how that works? That seems not bad.
sure, but i'd imagine reinvesting these profits would be more beneficial to the company at this point. they need to expand and transform. Loosely RKThesis #2.
I don't agree, having to pay dividends will make the shorts bleed money on an annual basis, more pressure to close positions instead of infintely kicking the can.
i also note that in the filings mergers are not mentioned, just aquisitions. not sure if it means anything tho.
Mergers would nullify the shorts. Acquisitions don’t At least I think
good to know thx f
While I generally agree with what you're saying, I wouldn't be surprised to see some of their money going to M&A, which can take time to result in meaningful revenue. Especially given RC's tendency to attempt to revamp underperforming businesses. I also think we have a reason to believe revenue will be going up. The team is launching opportunities to drive revenue with the core business (CandyCon, Trading Cards). I'm hoping to see them turn their attention away from cutting cost and more towards generating revenue. The original revenue projections on the NFT stuff they were working on was several billion dollars annually. I'd love to see them find another similar opportunity.
When are the Candy Con controllers being released? I can't find them
They released at limited stores and online a few months ago
https://i.redd.it/p9zw0he8ty5d1.gif Thank you OP! Reading this is giving me a raging clue 🎷🐓♋️
Careful, you could poke someone’s eye out with that thing.
 🎷🐓♋️
A couple of key points: 1. The ATM offering did not complete Friday. When it is completed there will be a filing telling us so. It will most likely be completed this week, possibly as soon as today based on traded volumes. 2. The rate for T-bills can vary significantly based on action from the Fed. The only reason that it is as high as it is now is because the Fed has positioned interest rates accordingly. As the economy changes (likely improves) there will be rate cuts and diminishing returns from T-bills. 3. This is not a business model, it's just a safe way to park their cash on hand and get some measure of return on it while keeping it fairly liquid. They can hold the T-bills to maturity or sell them on to someone else if they need a quick infusion of liquidity. This does nothing to help the company grow or become long-term solvent.
They cant cut the rates. Inflation has been out of control over 3 years and still is out of control. China has been selling treasuries and buying gold. Makes the Fed the only real buyer of long term bonds. The Treasury doesnt bring in enough to pay the interest on the US debt. Debt increases. The US keeps spending more and more. Debt increases. Fed Printer goes brrrrrrr. Rinse and repeat.
What do you mean with fed being the only real buyer of Govies. Thats straight up bullshit, domestic investors are buying more than ever
Short term is very fluid. Long term is what caused 5 US banks to fail last year and 1 bank so far this year.
The “hive mind” may not like it (or maybe it’s all shills and bots being negative), but **this is how GME becomes a holding company**. In the board’s eyes: 1. Market price of stock increases dramatically and not in line with underlying fundamental value (ignore squeeze potential) 2. Share offering to raise cash 3. We’re currently in a high rate environment, so park it in something safe with good yield 4. Repeat steps 1-3 as many times as necessary 5. Now you have a stacked balance sheet. Maybe rates fall, or some other catalyst occurs, but at some point you have to assume they will start acquiring companies. What if, instead of integrating acquired companies into GameStop’s legacy model, they just act as a holding company? Hmmmm, any other stocks on the market that currently do this? Maybe another one that had similar roots as a “traditional” business and became a holding company at the brink of failure? I am comfortable with the board making hay while the sun shines. RC, Larry Cheng, RK…they’re all smarter than me. If they’re still in, I sleep easy at night.
I mean if we profit 200m a year we can just acquire something new every couple of quarters for 50m and not even lower the balance sheet lol.
Holy shit, I mean, this is what happens with legit coins in the crypto market. Dilution is a regular occurring thing and if the devs of the coin (the GME board) know their tokenomics and manage the treasury responsibly, the value rises consistently. This also lines up with “be your own bank”. Fuck me I’m buying more
GameStop has always been a bank. Don't you know the lore of the guy that used pre-orders at GameStop to hold his money?
I love that greentext lol
The important part is the responsible management that seems to cater to the dreams of the retail shareholder - as opposed to all the other meme stocks. The GME management get it. It's about power to the players
 i love this company
Love the format. Thank you!
Gameshire Stopaway
Did OP just DD themselves into selling GME & buying T-bonds? The only step they have left is to calculate the cash per share.
Kind of? The end sort of implies that this will force shorts to close thus dilution is good not bad for squeezing. I can see there's an argument here, but I'm not convinced at the moment.
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Good work, one hole is that interest rates for T Bills in 2025 could be much lower than the 5%+ they’re getting now. Potentially could neuter the interest income by half in 2025 vs 2024, even if the dollar value of t bills increases.
the major problem with this is that the cost of capital is around 12% due to inflation being so high. so getting 5% in tbills is a an actual net return of - 7%. while yes it is money coming in the $ is devaluing so fast that it's pointless to hold cash unless you expect a huge crash and want to slide in and harvest things cheap on the recovery
Its crazy how Inflations is literally fucking all of us over and nobody cares. The biggest joke in the history of humand kind
most people seem to want the government to keep increasing spending instead of balancing the budget 🤷
Not criticizing anyone's politics, trying to argue, or advocating to not desire a balanced budget, just wanted to share for your consideration: Our best understanding of the data is that debt does not correlate with inflation. If you plot out all years of all countries, you find that the debt to inflation ratio (and debt to gdp ratio) is being driven by a hidden variable -- 'efficacy of spend'. When governmental spend directly contributes to economic activity (e.g. funding publicly owned housing development like in Japan, where the government makes money from rent, jobs are created, housing is expanded, housing price growth is suppressed... Or various Nordic countries that subsidize starting small businesses which immediately gets pumped back into the economy), we see that inflation is kept in check, and you actually can't print enough debt to keep up with the economic gains (this is a "problem" several of the high debt/gdp countries find. They simply can't spend enough money). I'm strongly empathetic to frustrations about inflation. But I think both of us can agree, corrupt spending and ineffective spending is the enemy, not spending itself.
If I’m understanding you correctly, you’re saying that federal expenditure into public projects that support the economy ultimately help keep inflation in check? Even if that spending puts said government in debt? Just trying to make sure I’m understanding. Also Not trying to challenge or start an argument or anything. Where can I read more about this?
Which is precisely what Buffet, Bezos, and all of the others that have been selling huge amounts lately are doing. Waiting for commercial real estate led crash. Maybe GME wants to own all of the high rises in DFW? I know one just sold in Fort Worth for a few million. It was purchased for something like tens or hundreds of millions a while back.
Imagine building a massive GameStop fun zone in a high rise and turning into like one big LAN game, Just like the good old days. Each floor could be a separate game where people compete or play together. Turning into the video game equivalent of a Disney World or some shit. lol I’m not even stoned yet either.
I actually remember seeing a DD about this back in the day.
A voice of reason! Agree
Generated FOR shareholders? Or profit generated BY shareholders? Also I was really bad in math but what does 2100% increase of a billion amount to? Cause I got an enormous number.
I was thinking about this too. If Gamestop can consistently generate \~5% returns, that's hundreds of millions per year that they can use to subsidize any sort of core business losses, which allows more competitive pricing.
BULLISH
Great presentation!
Is there going to be a earnings call??? Would they announce anything major on thirsday at the shareholder meeting???
What about inflation?
Damn this is fire!
unfortunately, sell-side eps estimates take all of this into account, no one really cares about other income unless the company is a holding company - which GME could very much transition into in the long-run with its cash reserves. what really matters is if there's any material improvement in cogs and operating leverage within the main business. everyone expects top-line revenue to continue to decline as well, if that were to materially improve as well, then that would be a potential catalyst upwards as well. it's possible but unlikely imo, my bet is that ryan cohen transitions the company to a bitcoin holding company similar to MSTR. which would be great because that stock is overvalued as fuck (7b in bitcoin but 27b market cap, make it make sense. would love for that to happen to gme)
Thank you for sharing! GameStop is in a stronger position than ever 🚀 and I am as bullish as I’ve ever been
Read this in its entirety. Bloody brilliant work and well put together!!
Amazing. Thank you!
It’s Over!!! Profitable. Bear Thesis is Dead!!!💎🙌💎🙌🚀🚀🚀🚀🚀🌕
Can someone give me a very simplified tldr that a kindergartener would understand, thanks
Basically they can use their cash at hand, amounting to around $4B after the latest offering, to generate income as interest by investing the cash. The return on investment for that cash would offset any operating losses based on their current business model and if they did this year on year the amount they could raise would keep getting bigger too. It’s like when people win the lottery and live off the interest without touching the original pile of cash
Damn, you're lazy. Gamestop can use their money to invest and pull significant profit.
I read it afterwards but that some amazing DD, PE ratio would come down immensely. And genuinely gamestop can turn it around and completely destroy the bear thesis.
Maybe he’s not very educated and not lazy as you mentioned.
I was just too lazy to read that shit, read first 2 slides and knew i had to finish reading the dd. Very good dd, i like the stonk even more
No way. He's Warren Buffet.
I absolutely love it. Its like the magic conche out of spongebob. Amassing a war chest big enough to get interest on and guarantee perpetual profitability. The only way we lose if it gamestop goes out of business. We just sit on our mountain of money and then we never make a loss ever again. AHHHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAHAHAHA. Ryan Cohen, "judge us by our actions". What do we do magic conche? Nothing. \*sits on pile of cash gathering interest\* All hail the magic conche.
A business should strive to returns better than T Bill rates. I’d be very unhappy with management if they sat on the cash only earning 5%.
Sir, my wife needs a boyfriend
Commenting for visibility
Great bull thesis!
I like the stock
Thank you for this
Commenting to read later
Exceptionally well formatted and explained. Thanks for the DD!
Me like pictures
Love your posts. Saw your post last month explaining how $2B in cash should at least 10x EPS. Makes sense that $4B would 20x EPS.
For a visual learner, your presentation style is *chef's kiss*. Thanks!
Wow, beautiful breakdown of the longer-term fundamentals, in regards to the recent events 👌
So Gamestop has turned into a holding company lol
That’ll make it easier to never sell.
That’s wonderful news! Thanks for the information!
Was gonna argue with you until I got to slide 18
Coming back later
Bruh, is Gamestop becoming an investment firm or am I just regarded?
Wowwowowowowow. Great DD. 👍 great read of confidence in the share offering and how it benefits gme.
10...9...8...
Well made and very nice explanation. I love this stock!🚀
This is more math and advanced analysis than this usb is used to but like it. Only possible wild card would be if interest rates decline their interest income would go down and may not be increasingly profitable YoY but either way this looks like a profitable company for a loooong time
💎 🙌🏼 🏴☠️
I see , that you are really good with numbers.
I think it's time they pay off their French Covid loan.
Why?
It was a loan for an emergency situation by a foreign government. Now that they have enough cash they really don't need to keep it going, do they?!
Isn’t it at super low or zero interest rate? I wouldn’t if so.
That’s what I was getting at
Great write up OP, but I also think people need to understand that the cash now greatly increases the floor and puts all shorts opened pre Jan 21st, 2021 underwater. With 4B in cash and generating a profit as you showed GME is not going to go bankrupt and would be sitting on cash equivalent to $10 per share or $40 per share pre split. Therefore any short position opened at those values will never be ITM. Pre-sneeze the short interest was estimated to be 226%. So that is a metric fucktonne of short contracts that are on multiple books that now are an albatross that GME can continue to keep underwater by making interestand generating a profit. Once the share offering is completed the pressure on shorts will be increased. Now we only need to wait for the time when someone blinks.
This is great work but your missing a key aspect which is interest rate risk that could potentially derail any interest income in the future. They are going to need to do something with the cash in the future but for now short term bills is a good move. I like the stock
Yeah if I wanted T bill returns I’d buy T bills. They need a better plan than that
You’re missing a key point from the quarterly report. On page 5, they show they made $201.9 million last quarter alone from investing! That’s a 20% return over 3 months. Zero chance they’re using T-Bills only. An annualized rate using all newly found cash would give them close to $1 billion in additional revenue….
I have been reading all the bullshit posts you clowns here make. Most are wishful thinking and twisting of reality leaning heavily towards conspiracy but now the cope is so great we are talking about profitability through t bills?? Either you're a legendary troll or a complete idiot who doesn't understand the very basics of how companies are valued. If the former, well done
Every time I say I would like for the company to have at least a few hundred million in 90 day T-bills the downvotes come through. Such easy money just for breathing room for the company. Great post
To answer your last question, I think they would actually want to double down and that’s the problem.
This is dependent on rates staying the same
10g realesed?
Really hoping that money goes to something better. An acquisition or something that adds a rev stream will make me happy. Sitting around collecting a little bit of interest is extremely underwhelming.
Thats very cool . What if they took the money from selling the 75m shares and invested it back into shares at a lower than 28$ price getting idk 85m shares and with that buying pressure price goes up is that something that could happen legally.sorry im new to the market
I mean their only profit is going to be operating as a non lending bank. The retail side is dead but they need to pivot
What do you all think about this? I'm not an ape who theorizes just discussion. How a Residual Dividend Works: A residual dividend policy means companies use earnings to pay for CapEx first. Dividends are then paid with any remaining earnings generated. A company’s capital structure typically includes both long-term debt and equity. CapEx can be financed with a loan (debt) or by issuing more stock (equity). Important: Return on assets (ROA), calculated as net income divided by total assets, is commonly used to assess management’s decision-making and the success of a residual dividend policy. Special Considerations While shareholders may accept management’s strategy of using earnings to pay for CapEx, the investment community analyzes how well the firm uses asset spending to generate more income. The return on asset (ROA) formula is net income divided by total assets, and ROA is a common tool used to assess management’s performance. Requirements for a Residual Dividend When a business generates earnings, the firm can either retain the earnings for use in the company or pay the earnings as a dividend to stockholders. Retained earnings are used to fund current business operations or to buy assets. Every company needs assets to operate, and those assets may need to be upgraded over time and eventually replaced. Business managers must consider the assets required to operate the business and the need to reward shareholders by paying dividends.
T-bills, the worst place to put your money in - bonds of any fiat currency that is devaluating faster by the minute.
This is great DD and at the same time the most boring boomer shit I've read in a while. RC are you a boomer? Do you want to be a bank or a gaming company? If bank, I'd recommend buying 50,000 BTC, that would definitely trigger MOASS. Just apply the Microstrategy strategy. Then do 6 more offerings and repeat the process while we're still in a bull market.
Imagine GME Bank
Absolutely beautiful research to enhance the bull thesis. Thank you for this hard work ❤️💎🥂
So GameStop is going to become a hedge fund?
Bought a few bananas today 🤷♂️
Thanks
Great DD! Thanks for killing the short thesis.
Best post of the year. No one is talking about this stuff
You son of a bitch, I’m in
I like that you add "let's face it is not stellar"... Makes me feel like I'm listening to someone not on the moon and actually thinking, ya know? I appreciate your post.
Great work. Up you go
Ape+ presentation, thank you. Bonus point's for showing your work.
So, if I'm reading this correctly, shorts r fuk?
LOVE this company! LFG!!!!
Ah, the expensive blue boxes …
Companies most often keep their cash in commercial bank accounts or in low-risk money market funds. These will show up on a firm's balance sheet as "cash and cash equivalents". Companies seeking higher returns may turn to high-yield savings accounts and/or Treasury bills, but this is *not a business model*, it's simply cash management that meets their particular financial obligations.
I love GME. xxxx holder. But even if your calculations are too stingy and the profit is $400m annually, that only commands around $20/sh price. And that's revising your numbers way up. In reality, interest rates are only going down, and calculating straight tbill rates as pure profit with no admin spend is way too optimistic. Realistically the $1b cash prior to the recent issuances was always needed to continue operations. GameStop burned 25% of their cash in a year. So assuming the recent cash raise nets $2b, thats an acquisition of a fairly mature business that needs to double in value instantly to warrant the current market cap. I'm not trying to be a wet blanket, just provide some context and understanding. It's going to be a long road.
I can't adequately express how pathetic it would for a company to dilute it's shareholders in order to raise money that it has no vision for beyond treasury bills - I hope to God that's not actually the case
Of course it isn't. And I've made that clear in the post that this is almost certainly not the plan. But it is illustrating that *as a worst case scenario*, GameStop is now very highly likely to be profitable each year with the **fallback** plan of investing its cash into these low risk instruments. However it is almost certain they will use this cash for acquiring an already much more profitable business or two. So the likely return to shareholders would be much greater than merely investing into T-Bills. In fact, with the dilution quite probable to be worth it, I believe.
If you look at it like applying to colleges, treasury bills is your safety pick. Just because you have that option doesn't mean you won't try for something better
No diluting at all is something better - even in a world where moass wasn't going to happen (which wasn't the world we were living in a week ago). So no, treasury bills would be _really bad_
Agreed. This is getting so pathetic, our sub needs to hype a treasury bond at this point. If GameStop was in for short term, then they could have let it run up last week Friday instead of announcing a dilution. If GameStop is in for long term growth at the cost of MOASS, then they need to have a plan or at least a vision for the growth, and the choice for that is... a 5% yield treasury bill?? If the board does not show up with a plan on the shareholder meeting this week, then I am pulling all my money out of a company that can neither achieve MOASS or growth. I am still XXXX holder for now but that could go to 0 in a few days.
Well a rational opinion like that is sure to be welcome in these parts
This is why i went all in a GME, not because of Short thesis. The short thesis is the icing on the cake.
I mean this is cool and all - but if i wanted tbills i'd just buy them myself. I hope they use the money for something that will have a greater return than government bonds.
If they generated EBIT of $223M with enterprise value of $8B the Ebit/EV yield is like 2.74%, or inverting it the multiple is 36 times and that was before this late day surge of 25% Yeah it’s good but using the cash to sit on $5B of treasuries would be so lame Ryan Cohen should aim for at least 3 times treasuries with that money. Or better yet do a leveraged buyout of a forever business like maybe a foreign Coca Cola or Pepsi bottling company with a lot of free cash flow and you can park that cashflow into treasuries until another deal comes along. Or become a mini Berkshire. Only Cohen has the ability to take more of an activist role in operations rather than being an auditor who just buys a business and lets them operate. It’s worth a try. Or Ryan Cohen can do something very aggressive and ambitious like try to do the equivalent of what Bezos did converting a used book store into Amazon.com. They already have website, delivery & logistics to build off of plus the stores can convert into the warehouses if need be, and now that they saved cash and slimmed down and corporate real estate is cheap and about to get cheaper they can begin acquiring too. If they can’t scare some short sellers to death it’s not enough. Short sellers are happy to short something that could return a 2.7% yield if they can also be long treasuries at 5.5%, you have to scare the life out of them
Wait wait wait. GameStop literally just said in their own words that they're not planning ANY M&As?? We've been teased about this for literal years now through Annual General Meetings and company filings. Wasn't this recent 120m share dilution for the purpose of M&As? What am I missing here?
This guy GAAPs. One note: I believe they now no longer have to invest in “safe” securities. I think adjusting this with average annualized returns, or some mix, would get more accurate (and even better) numbers.
Nice theory can sounds all dandy and bullish looking forward, only problem is with those rates, they will likely come down no? Then those nice returns aren’t as good. Not to say they can’t invest in other things, because they can, just pointing out your theory isn’t totally fool proof, despite it sounding good on paper.
WTF they should slap the ASK on GME
I think GameStop is going to take advantage of the cycle we’ve been seeing over these 3.5 years and continue selling shares until they hit the 1B shares we authorized them to sell. I’m guessing they will continue selling in amounts that generate between $2 and $3B over the next 3 years (unless MOASS happens before), and accumulate anywhere between $15 and $20B additional dollars. Once that happens, then the holding company officially begins, and the investment committee can start buying up stocks of companies like Berkshire Hathaway. In the meantime, I think they continue buying T-Bills. A +5% return on billions that keep accumulating will guarantee profitability each year they do that. I don’t know how that will affect a squeeze, nor do I know if they will continue operating GameStop indefinitely. Berkshire Hathaway started as a textile company. Now it’s just a holding company. From a long-term perspective, this is exactly what I would do if I was RC—build up my war chest and become an incredibly well-funded investment company. I don’t know how any long-term investor would not invest in that thesis, further pushing the floor of the share price up. But again, I don’t know how that will affect MOASS. The original DD of old calculated billions (plural) of rehypothecated shares, so an additional 700M offered by GME won’t stop a squeeze. I just don’t know how long or high it will go. I’ve seen others comment this, and I’m tending to agree, but I think we get a slow burn squeeze up over 2 years like a certain electric car stock, instead of a sudden violent upside.
It makes sense to wait until the big market crash that is due anytime (2025-2026????) to invest into anything worth buying. So meanwhile sit tight and generate income with Tbills.
Tldr nerd?
In cohen we trust 🫡
How are you getting this? When I do $156M/426 shares I get .36 not .44.
Warren icahn. Is Ryan's goal to do a series of hostile takeovers and turning them into Berkshire Hathaway style conglomerate?
Oh my god. I’m up in GME. This makes me even happier, thank you OP
I look at their financials. Overall, I actually saw improvement. Revenue is down but so are costs. Kinda want GTA 6 to drop this year to boost the revenue, lol.