What Ryan Cohen’s Insider Buys Say About GameStop’s True Value

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Just when meme stocks seemed down for the count,

Chewy

co-founder Ryan Cohen stepped in and bought 100,000 shares of

GameStop

on Tuesday. The decision not only helped spark a rally—it also says a lot about how the GameStop chairman views the firm’s turnaround prospects.

Cohen’s RC Ventures bought shares at prices ranging from $96.81 to $108.82 at an average price of about $101.76, according to a filing with the Securities and Exchange Commission and Barron’s calculations. RC Ventures now holds 9.1 million shares for an 11.9% stake. Spending another $10.2 million on GameStop is a major bet on his turnaround effort for Cohen.

“I put my money where my mouth is,” the chairman said in a

Twitter

post.

GameStop stock has traded as low as $77.58 in the past 12 months but closed up 14.5% to $141 on Wednesday. It wasn’t just GameStop;

AMC Entertainment

stock rose 13.6% to $20.74. On the flip side,

Bed Bath & Beyond

stock—another Cohen bet and Reddit favorite—fell 6.4% to $22.02.

Shares had stumbled in recent months as Wall Street waited for real signs Cohen had a game-changing plan that would help GameStop shift its fortunes.

The company has invested in fulfillment and customer capabilities, attracting talent from e-commerce firms like

Amazon.com
,
and improving GameStop’s website and mobile app. It has come at a cost. The company reported a net loss of $147.5 million in the fiscal fourth quarter, compared with net income of $80.5 million during the prior fiscal fourth quarter.

Wedbush analyst Michael Pachter, who has an Underperform rating with a $30 price target on GameStop, notes that Cohen’s purchase helped send the stock higher, which could benefit the company if it seeks to raise capital again by selling stock.

“They should have enough cash to support two years of burn, but I would expect a capital raise by year end if they keep burning $100 million or more per quarter,” Pachter says.

Some short sellers are still betting against GameStop. S3 Partners’ Ihor Dusaniwsky told Barron’s his firm estimates GameStop’s short interest at a recent 11.61 million shares sold short, or $1.43 billion. Though shorts were making a killing—on paper—betting against GameStop in 2022, Tuesday’s action cost them $365 million in mark-to-market losses.

One wild card for GameStop is its efforts launching a marketplace for nonfungible tokens. Though users online have pushed back against the implementation of NFTs in videogames, GameStop is betting big on blockchain technology, and has announced partnerships and investments with firms like Immutable X.

“We have learned from the mistakes of the past decade, when GameStop failed to adapt to the future of gaming,” CEO Matt Furlong said during last week’s earnings call. “It is important to stress that GameStop had become such a cyclical business and so capital-starved that we’ve had to rebuild it from within. We’ve also had to change how we assess revenue opportunities by starting to embrace, rather than run from, the new frontiers of gaming.”

Still, such efforts are speculative, especially as the company hasn’t provided near-term or long-term financial targets. The uncertainty has led some to liken GameStop to a risky venture capital investment. 

Cohen seems to like his odds. In the meantime, if he continues to buy GameStop shares when they fall to around $100, that could give investors some optimism and help set a point of resistance for shares.

Write to Connor Smith at [email protected]