Korean Hedge Fund Joins Michael Burry to Bet on U.S. Game Seller
Korean Hedge Fund Joins Michael Burry to Bet on U.S. Game Seller
(Bloomberg) --
A Seoul-based hedge fund has joined hedge fund investor Michael Burry in betting U.S. game retailer GameStop Corp. is oversold.
The stock has already lost 32% this quarter after sinking in each of the past six years on multiple disappointing earnings reports and an aborted effort to sell itself. And yet, Must Asset Management, which oversees $400 million, raised its stake in the Grapevine, Texas-based company to 5% over the past six months, according to a regulatory filing last week and Kim Doo-yong, the firm’s chief executive officer.
It’s a bold bet, especially at a time of social distancing to avoid catching Covid-19. GameStop shut its U.S. stores until further notice due to the virus. The new consoles to be introduced at the end of the year, however, will be “a tailwind” for the company, Kim said.
“As an investor in South Korea, where the gaming industry is highly developed, we believe what GameStop can offer is so important,” Kim said. “No matter how well online stores develop, companies still want to introduce their new games at a face-to-face meeting with potential customers, and GameStop is the only place to do that.”
Most Street analysts are bearish on the firm. The transition to digital distribution and deteriorating finances are among the concerns they highlight.
But some market players see value in the stock. Last August, Michael Burry (an investor featured in the move “The Big Short”) petitioned GameStop to buy back shares. His Scion Asset Management holds a 3.56% stake in the company, according to data compiled by Bloomberg based on filings.
A call to GameStop outside office hours went unanswered and it didn’t immediately reply to an email seeking comment.
“In all cycles of consoles, people were worried that GameStop was outdated, that it would diminish with the digitization of the industry,” Kim said. “Still, many users want to grab hard copies of games, so they line up at GameStop stores. The possibility of a short squeeze is also rising for the stock -- investors’ pessimism is extreme.”
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