GameStop, the original meme stock, has perplexed many with its ability to defy the odds, maintaining its status despite a struggling business model that has not succumbed like many others. In a recent effort to prolong its success, the company transformed itself into a hedge fund by issuing bonds aimed at acquiring cryptocurrency. The management seems to be banking on the Trump administration’s favorable stance towards digital currencies, along with ongoing crypto speculation, to distract investors from the challenges facing its core business, hoping this will boost share prices.
Historically, such strategies have worked, but this time, investors sensed a hint of desperation. While Bitcoin remains the most recognized cryptocurrency, its price volatility is significant; currently, it stands at $84,000, a considerable drop from its peak values. As the company converts sales into shareholder dilution, existing shareholders have already faced substantial dilution.
Following the announcement, short selling began, and GameStop, trading under the ticker GME, experienced a dramatic decline of over 20 percent on Thursday, with trading volumes soaring to about ten times the average. The downward trend continued on Friday.
This sell-off could be attributed to a broader market anxiety regarding tariffs, reduced consumer confidence, and inflation. Alternatively, it may signify a reality check for one of the last remaining examples of market exuberance driven by irrational speculation.
Despite having the support of notable investor and entrepreneur Ryan Cohen, who has successfully navigated the company through rough waters in the past and improved its financial position, the fundamental business model of GameStop remains unchanged. The company, primarily engaged in selling video games at retail locations, is not positioned to be viewed as an innovative disruptor, and projections indicate a decline in video game sales between 2023 and 2024, with most analysts showing little optimism for 2025.
My assumption is that Cohen is aware of the disparity between the stock’s relatively strong price and the underlying business, which is why he is trimming expenses while simultaneously diluting shareholder equity in an effort to accumulate cash. The recent move to raise $1.3 billion through convertible debt aims to enable GameStop to venture into the cryptocurrency market.
GameStop will inevitably maintain its dedicated fanbase, who view Cohen as a hero. The stock became a symbol of the 2021 meme frenzy, which even inspired a movie depicting the events, showcasing retail investors who drove the stock price to astonishing heights, ultimately leading to the downfall of a short-selling hedge fund.
However, the stock market landscape of 2025 has changed considerably due to various factors, including a Federal Reserve that has ceased aggressive monetary expansion and the absence of stimulus checks that previously fueled speculative investments. Prior to GME’s recent drop, shares had fluctuated but generally stabilized around the $30 range for three years.
Keith Gill, known as “Roaring Kitty” and a key figure among GME enthusiasts, occasionally resurfaces with enigmatic remarks that excite the community. However, these spikes in interest are often fleeting, with stock prices reverting to previous levels.
Currently, we are witnessing a seller’s market where fundamental factors are taking precedence over meme-driven enthusiasm. The $1.3 billion in convertible debt that can transform into common stock is more than just a speculative crypto move, as it also reflects a strategy of dilution, introducing an additional 46 million shares into circulation for GameStop. This raises questions among investors about Cohen’s rationale for pursuing Bitcoin if the video game business is performing well.
Investors are also scrutinizing valuations, as GameStop trades at a price-to-earnings ratio of 65, significantly higher than the S&P average, even after the stock’s decline from its 2021 highs. I believe that the GME meme investors may have more resilience compared to others, such as AMC Theatres, which has descended into penny stock territory, largely due to Cohen’s influence and the relatively favorable performance of the stock over the last year. However, the company is demanding a lot from its supporters, as an equity payout in the near future poses a substantial challenge. The future of the mall-based video game retail business and the sustainability of Bitcoin, which critics argue lacks intrinsic value, remain uncertain.
DEI Under Scrutiny
A coalition of financial officials from red states is intensifying efforts to eliminate Diversity, Equity, and Inclusion (DEI) hiring practices by exerting pressure not only on Wall Street firms but also on the Securities and Exchange Commission. Reports from Teuta Dedvukaj of Fox Business indicate that approximately two dozen officials from the State Financial Officers Foundation (SFOF) are urging influential players in the capital markets—such as major asset managers and proxy advisors—to raise concerns about the potential financial risks associated with questionable DEI policies. OJ Oleka, the CEO of SFOF, mentioned that he has yet to receive responses but will provide updates as they come in.
