Is GameStop a tale about the democratisation of financial markets? Is it a punch in the face for the Goliath hedge funds which prey on weak companies. It may certainly have cost them a lot of money. However has it challenged anything fundamental.

GameStop is a very large chain of video game shops. According to the latest accounts I could find on line the company has 3,642 stores in the US and 1,867 stores elsewhere around the world. Its stores are all leased and in 2019 around 70% of these leases were due to expire in the next two years.

In June 2019 the Board elected to eliminate their quarterly dividends with immediate effect. A helpful graph of their stock’s value shows it halving in the period from January 2015 to January 2019. All of this probably reflects the fact that the net sales of the business fell from $9bn in 2015 to $6.4bn in 2019. This meant that a net income of $379m became a net loss of -$464m. Stock holders equity held on the balance sheet halved in the twelve months from 2 February 2019 to 1 February 2020.

I am not a financial advisor and adopt a very timid attitude to anything beyond a normal bank account. There may be financial wizards who can see value in the accounts of GameStop that I am missing. But, were I to come into a small inheritance and felt like playing the market this is not the first stock I would chose.

Not only do all those numbers look consistently bad but this was all before the impact of CovEcon-19. Further, my limited understanding of the software games market (two sons) makes me think that their acquisition of such things is, if not directly over the internet, then via an Amazon van over the internet, rarely, ie. never from a game store.

I have argued elsewhere that I can see very little value in short selling. I can, however, see when a short selling bet looks like it will be in the money. OK, lots of day traders have been able to change this in the case of GameStop. They have inflicted some pain on the hedge funds. But, given the very likely state of the global economy post CovEcon-19, short selling bets will not be in short supply.

Are there enough day traders out there to defend all the companies subject to attack? And it is interesting that enthusiasts have rallied around to pump the shares of a multi billion dollar company which pays its staff, of mainly games enthusiasts, $8 per hour.

The day traders cannot defy gravity for ever. Eventually the underlying fundamentals of the business will assert themselves and the stock will collapse. For many this has been an interesting spectator sport with lots of different takes on the pros, cons, morals and mysteries of the process.

However it is right that the authorities wish to review this whole phenomenon. It has thrown up all kinds of questions about the operation of the market and particularly how access can be differentially controlled to the benefit of the hedge funds. But a close review of the transactions should take place to see who might have benefitted from this organised movement of the market.

I fear a whole lot of day traders will lose out to a few savvy investors. At the moment the stock is trading at about $50 per share. This is way below the $347 at the end of January. However, it is $46 more than it was trading this time last year.

The music is slowing, when it stops you don’t want to be the last person holding the bits of paper. I guess a lot more savings are going to change hands over the next few days and, sadly, I suspect it will not be in the direction of greater wealth equality.