Gamestop: From $35B Meme Stock Hero to 82% Implosion

Added: 2026-05-17

[00:00:00]GameStop is where you probably went to buy and trade video games, upgrade your console, and browse for your next adventure. But by 2021, it was struggling to stay open. Then on January 28th, 2021, Robin Hood halted trading on GameStop at an intraday peak of $483 per share, jumping up from roughly $20 a share. Millions of retail investors believed they had broken the system. 5 years later, GameStop sits on $9 billion. The question is who built that and what it was really for.

[00:00:44]GameStop started as Babages, a mall-based software store founded in Dallas, Texas in 1984. Over the next two decades, through a long string of deals and mergers, it became the largest video game retailer in the world. At its peak, the company ran more than 6,000 stores across dozens of countries. It had a near lock on physical game retail in North America and a growing presence across Europe and the Pacific. The engine that made it work was the used game trade. Customers brought in old titles for store credit, often getting a fraction of the retail price in return.

[00:01:23]GameStop then resold those same used copies at near new prices, keeping the spread. The margin on a used game sale was much higher than on a new one, and the turnover of stock was huge. The PowerUp Rewards loyalty program created a steady loop of trade-ins and repeat visits that kept customers cycling through the stores week after week. The problem they faced was a shift in technology. Digital downloads. Digital downloads don't need a store, a shelf, or a trade-in counter. By 2013, every major console maker was building a directto buyer digital store that would cut out GameStop entirely. Sony, Microsoft, and Nintendo each pushed hard toward digital sales. And the math behind physical game retail started breaking down in ways that were hard to reverse. The decline picked up speed through the late 2010s. By December 2020, GameStop reported Q3 net sales down more than 30% versus 2019 alongside a $63 million operating loss. The stock closed the next day at $13.66 per share. The long-term slide showed up in the revenue mix, too. New video game hardware, meaning consoles and controllers, fell from 54.9% of total revenue in fiscal 2024 to 50.7% in fiscal 2025. Software, or the games themselves, fell from 26.3% of the business to just 20.1% over the same stretch. As more buyers went digital, physical retail was dying and digital was winning. GameStop began to look like Blockbuster with a different logo.

[00:03:12]The squeeze that came in January 2021 was part of a chain reaction. By January 12th, short interest on GameStop had hit about 71 million shares with total short bets worth roughly 1.4 billion. The stock was so packed with short sellers that it didn't take much buying pressure to set the whole thing off. Keith Gil had been posting GameStop analysis on the Wall Street Bets forum as early as 2019, sharing screenshots of his portfolio and building a following over months. In a July 2020 YouTube video, he said the stock was trading at about $4 and argued it was worth more than the market gave it credit for. His argument was simple. The short side was too crowded. The downside was already priced in and a squeeze was mechanically possible if enough buyers showed up at the same time. Then things moved faster than anyone expected. On January 11th, GameStop named Chewy.com co-founder Ryan Cohen to its board through a deal with his firm RC Ventures. On January 13th, shares rose 57% in a single day. On January 19th, Citron Research tweeted that GameStop buyers were the suckers at this poker game, which only poured fuel on the fire. On January 26th, Elon Musk posted Games Stonk on Twitter, and the stock jumped more than 90% in a single session. Between January 11th and January 27th, shares surged as much as 1,600%.

[00:04:45]By January 27th, Melvin Capital, who handled a lot of the short bets, lost 53% of its total investments in January.

[00:04:54]Citron also closed its GameStop positions at a loss. Days later, Robin Hood halted trading in the stock, infuriating many of the retail traders who' driven the move. The Wall Street Bets forum grew from 3 million members to over 8 million in a single week, and Congress held hearings. The story everyone told was retail investors versus hedge funds, David versus Goliath, the little guy winning for once. For most people watching, the story ended there. The stock crashed, the squeeze fizzled, and the uprising ran out of steam. That is what it looked like from the outside. But from the inside of GameStop's balance sheet, something different was taking shape.

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[00:05:57]While retail investors held their shares, many of them refused to sell because selling meant giving up on the cause. GameStop's board was selling.

[00:06:07]Ryan Cohen came from the world of building companies, executing exits, and deploying capital. So, he had the company itself put new shares onto the open market through something called an at the market equity offering, or ATM for short. Here is how it works. The company creates new shares and sells them at whatever price the market is paying that day. There's no public announcement. It happens quietly in the background as long as there are buyers.

[00:06:37]And every time the stock spiked on meme-driven hype, GameStop could print new shares and sell into the wave. The scale of this was stunning. In the 2024 fiscal year alone, GameStop raised over 3.4 million through at the market offerings. The effect on the balance sheet was instant and huge. Cash and marketable securities went from roughly 900 million in February 2024 to over 4.8 billion by February 2025. By the end of fiscal 2025, total cash and marketable securities had climbed to roughly 9 billion. The retail investors thought they were part of a movement. From a balance sheet view, they were part of a fundraising drive. Every share bought at a high price and held on principle was a share that GameStop could water down by issuing more. The energy was real, deeply felt and sustained over years.

[00:07:32]But the financial consequence of that energy was permanent capital accumulation in the company's bank account. The question that almost nobody asked in 2021 was if the retail business is dying, what exactly does Cohen plan to do with all of this money? And if you want to know what other people are doing with their money, get a deep dive by subscribing to my newsletter. I go over distressed debt, leveraged finance, bankruptcies, and restructuring company research so you always know where the money's flowing. Click the link in the description. The answer to the question of what was happening to the GameStop money showed up in the stages, and each one pointed in the same direction. First came the Treasury policy. Cohen pushed through a new investment policy that let GameStop put excess cash into marketable securities and even certain cryptocurrencies like Bitcoin. This was a board level decision, not a casual move. It set the legal ground rules for everything that came next because without it, none of the later spending would have been allowed under the company's old guidelines. Soon after the policy changed, GameStop began shifting hundreds of millions of dollars into Bitcoin as a treasury reserve, ultimately disclosing about 368 million of digital assets on its books. At the same time, Cohen was cutting out everything that cost money, but didn't pull its weight. GameStop sold off its Italian business and shut down Germany in fiscal 2024. In fiscal 2024, GameStop began selling off parts of its European footprint, including Italy, and started winding down Germany. Then followed in 2025 by exiting Canada, France, and New Zealand. Overhead costs tracked as selling, general, and administrative or SGNA fell from around 1.1 billion in fiscal 2024 to $910.2 million in fiscal 2025. That's a drop of roughly $190 million in a single year.

[00:09:31]The global footprint that once spanned dozens of countries was being taken apart piece by piece on purpose. The one part of the business that grew was collectibles. Trading cards, graded items, and branded goods climbed from 13.0% 0% of quarterly revenue in Q4 2023 to 21.1% in Q4 2024 and then to 33.1% in Q4 2025. For the full fiscal year 2025, collectibles made up over 29% of total revenue or roughly 1.1 billion. These are real physical products that you can't download and the stores that remain are being rebuilt around them.

[00:10:11]Then came the debt raise. In 2025, GameStop issued 4.2 billion in zero coupon convertible notes. These are bonds that pay no cash interest and can be turned into stock later on. In plain terms, the company borrowed 4.2 billion, but does not owe a cent in interest on it. The notes trade above par, meaning the people who hold this debt believe they'll get paid back in full and then some. The bond market is effectively pricing what Cohen does with the cash.

[00:10:44]Finally, GameStop handed out warrants to both common shareholders and bond holders. A warrant gives the holder the right to buy shares at a set price within a set time. These warrants show up as 42.2 2 million non-cash expense in the fiscal 2025 books with a fixed predetermined price or strike price of $32 over roughly the next year. They give the company another way to raise cash from stock sales without a splashy public offering. Every one of these moves points the same way. Cohen is using the store's cash flow, its stock market listing, and its loyal retail fan base to build something closer to an investment firm. The balance sheet now defines what this company is worth more than the stores ever could.

[00:11:40]There is something quite ironic about all this. The retail investors who held through the squeeze and beyond believed in something called MOAS, short for the mother of all short squeezes. The idea was that the January 2021 squeeze never fully played out. That hidden short positions were still buried in the system and that one day a massive wave of forced buying would push the stock to prices no one had ever seen. Within this group, holding was loyalty and selling was betrayal. The Wall Street Bets forum, which had grown to be over 8 million members by early February 2021, became the home base for keeping that belief alive over the years. So, if you follow the chain, you can see that the MOAS idea was needed for the stock price to stay high. The high stock price let GameStop run ATM offerings. The ATM offerings filled the balance sheet, and the balance sheet, now holding 9.0 0 billion in cash and securities made the company impossible to push into failure through shortselling. It means the very thing the MoAS idea needed, a high stock price, created the very thing that made MoAs impossible. A balance sheet too strong to break. What exists today is a company that operates on two entirely separate levels. On one side, a smaller, leaner US retail chain built around collectibles, trading cards, and the PowerUp rewards program. The US business made roughly $283 million in operating income in fiscal 2025. That's real profit from real stores. On the other side sits a $9 billion pile of cash with wideopen rules on how to spend it, run by a CEO whose own company calls its reliance on him a key risk factor in its annual filings. What Cohen does next with that 9 billion is the question bond investors obsess over. The convertible debt has traded above par, a sign that big holders are betting on his next move. The company now looks less like a retailer and more like a holding company wearing a GameStop hoodie. GameStop's US stores still sell video games, but the next chapter has nothing to do with video games. And that may have been true since 2020.

[00:14:00]But the story isn't over. On May 3rd, 2026, the answer to what does Cohen do with all this money arrived. GameStop submitted a proposal to buy eBay at $125 per share in cash and stock, a value of roughly $55.5 billion for a company nearly four times GameStop's size. Half of the cash would come from GameStop's $9.4 billion balance sheet, plus 20 billion from TD Securities, who are a subsidiary of TD Bank. GameStop had a 5% economic stake in eBay. Cohen is serious. He said publicly that he's prepared to take the bid straight to shareholders through a proxy fight if eBay's board refused to engage. He also said he'd run the combined company with no salary, no cash bonus, and no golden parachute. The market read it exactly how you'd expect. eBay shares rose about 5% while GameStops fell more than 9% and analysts at Morgan Stanley and Bernstein questioned whether two fundamentally different businesses belong under one roof. But the bigger point is that the $9 billion finally has a target. The hoodiewearing holding company made its first real move and it wasn't for a video game.

[00:15:32]If you want to find out what damage the GameStop short sale did to Robin Hood or about other companies who are either struggling right now or who have failed already, click the links above.