Redditor Revolt Propels Game Reseller Largely Loathed by Gamers
(Bloomberg) -- There’s some irony in the fact that Reddit, an online chat community full of gamers, has propelled GameStop Corp. to unbelievable levels. After all, video game fans have loved to hate the struggling retailer for decades.
Over the past week, a collective of individual traders on Reddit’s r/WallStreetBets community sent GameStop stock to astronomical heights in an experiment to stick it to hedge funds, which had sold the stock short. At the beginning of this year, GameStop was trading at $17. By Wednesday afternoon, it was over $340, valuing the unprofitable company at more than $25 billion.
GameStop’s resuscitation may seem like it should be inherently good news for video game fans. But unlike the beloved retailer Toys R Us Inc., GameStop was never very popular among gamers. The Reddit community choosing GameStop as the stock to pump may have been one giant practical joke.
Gamers have a long list of complaints about Grapevine, Texas-based GameStop, from the way they treat employees to their pushy and controversial sales tactics.
Over the years, many gamers begrudgingly shopped at GameStop only because they had little choice. The store made it easy to trade in old games for money or to be used toward other purchases, which cash-strapped fans could appreciate. But the values became a punchline. A brand new game, which cost $60, might fetch $30 at your local GameStop. Older games would return a few bucks at most. Social media is full of jokes about how you can trade GameStop’s stock back to the retailer for a fraction of the price.
The company also became known for questionable practices such as selling opened copies of games as if they were new. Sometimes, customers would take home a “new” game only to discover that someone else’s save file was already on the cartridge.
Many video game fans grew tired of the way GameStop treated staff and the way those employees had to act with customers. Worker performance was tied to the number of game pre-orders and rewards cards they sold, which led to constant hawking. It was impossible to call or visit a GameStop store without being pushed to pre-order whatever games were coming out next.
In 2017, GameStop made headlines for its controversial Circle of Life program, which essentially punished employees for selling new instead of pre-owned games. As a result, some staff said they would lie to customers about whether they had new copies in stock.
Video game publishers have little love for GameStop, either. When customers bought pre-owned games, the people who actually made those games didn’t see a dime, which led companies like Electronic Arts Inc. to pioneer strategies to get people to buy new copies. The publisher decided to put a one-time-use code in each copy of some games, rewarding whoever got to it first -- and punishing the secondhand market.
So, for many gamers, seeing GameStop as the butt of a joke on Wall Street is a dose of schadenfreude.
Such widespread disdain for the retailer from all corners of the gaming industry has probably helped fuel the frenzy behind GameStop on Reddit.
The stock surge makes no sense. GameStop has struggled as many former customers switched to buying digital copies directly on their consoles. The coronavirus pandemic, which has kept most people out of the malls where many GameStops operate, exacerbated the company’s decline, and it reported sales fell 30% in the quarter ended Oct. 31.
The r/WallStreetBets campaign shows that most investors driving up the shares are motivated by a populist desire to take down hedge funds with big short positions. But the whole play has also been egged on by internet jokes, or memes. And to gamers, there are few bigger memes than GameStop.
“If this was just Google or something, no one would care that much,” said Allen, a r/WallStreetBets poster who asked only to be identified by his first name, in a phone interview. “But the fact that it’s GameStop, that we’re going to take on a hedge fund because they shorted GameStop, it’s funny. There are great memes to be made out of it.”
Allen said he now has over 1,000 shares in the retailer, which he bought a few months ago for less than $20. He said he sees this as an opportunity for GameStop to become a better corporation without the pressure from Wall Street short sellers. “If this company is going to go out of business, they deserve to go out of business on their own terms,” Allen said.
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