GME - Game Stop Corp

[Guest matt@thesovagroup]

One area where GME got a lot of cash flow was the decrease in inventory.  Almost $600m in working capital was freed up from the previous year and this is not from just closing stores.  This liquidation of the inventory probably won't be able to repeat next year. They are sort of burning the furniture to light the house until next Nov with the new console cycle. 

 

It's just a great story to watch play out.   

[peridotcapital]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

[Guest matt@thesovagroup]

Some people always wonder why companies don't just liquidate when their time has come.  I think the answer is obviously they like to keep their "empire". 

 

GME: As of November 2, 2019, we classified our corporate aircraft, with an estimated fair value, less costs to sell, of $12.8 million as assets held for sale

 

This seems like the right decision now, but you have to wonder if this should have been done much earlier and what other things like this are hiding in their corporate SG&A. 

 

 

[dwy000]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

If they use all the cash to buy back stock.  I would have said that was a crazy capital allocation decision before last quarter.

[dcollon]

I just inquired on the cost to borrow GME.  I was quoted 34.5%.

 

[thepupil]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

 

[peridotcapital]

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

 

Fair point, but the time period in question (November 2008) and what was going on with the economy and credit markets at the time probably had a lot to do with that particular situation. Assuming a similar economic environment to today, that seems highly unlikely, but you are right, unlikely things can happen at an unlucky time.

[RadMan24]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

 

 

Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

 

Gee, wonder which one would struggle of there was a credit crisis.

[blainehodder]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

 

 

Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

 

Gee, wonder which one would struggle of there was a credit crisis.

 

Would you rather a Blockbuster comparison which is probably more apt? This is 2019. The internet exists. It is in game creators' best interest to cut out GME. What could possibly turn the revenue trend around? What melting retail company has managed to close down expediently to return cash to shareholders in the face of complete technical obsolescence regardless of balance sheet strength?

[thepupil]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

 

 

Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

 

Gee, wonder which one would struggle of there was a credit crisis.

 

you are welcome to buy the bond @ $95 and make 900 bps over the treasury if you think it's such a sure thing.

 

Do you think the AR/Credit departments at GME's vendors are having discussions about GME's survival? I think they would be, but I could be wrong.

 

Retailers have a lot more liabilities than debt. they have landlords (I know GME has been shortening lease term for years but they still have minimum payments), vendors, etc.

 

I'd either be in the equity and get paid a multibagger if the rebound comes as it eats up all the shares or not play.

 

to be short the stock or long the bonds makes little sense to me. they are both short volatility positions in an fundamental situation of extreme volatility (collapsing sales and share count).

 

 

[5xEBITDA]

Actually, the Circuit City chapter 11 process is a good case study on how retailers fall into bankruptcy. With a little imagination, it is applicable to GME today.

 

Here are some fun quotes, along with my commentary, from Circuit City's first day filing on November 10th, 2008.

 

In the September [2008] 10-Q, the Company stated that its books and records reflected total combined assets of approximately $3,400,080,000 and total combined liabilities of approximately $2,323,328,000.

 

I wonder how many people calculated book value of approximately $1 billion at the time and assumed there was a tangible asset support...GME currently has total assets of $3.1 billion and liabilities of $2.5 billion - ~$600 million book value could seem attractive to some people.

 

[Over the same time period,] the Company experienced additional losses of approximately $403,989,000. The largest driver of declining performance was a double-digit decline in in-store traffic from the previous year.

 

Sounds analogous to the declines in same-store-sales and operating losses GameStop is currently experiencing.

 

[Circuit City] pursued three primary [turnaround] objectives...restore its brand...discontinue unprofitable or unnecessary stores and markets through store closings and layoffs. Finally, the Company sought to preserve and, in some instances, improve vendor relationships.

 

This is pretty much retail turnaround 101 - all of the above have been referenced by GME management in some fashion over the past six months.

 

[The] chapter 11 filing is due to three factors...1) erosion of vendor confidence; 2) decreased liquidity, and 3) a global economic crisis.

 

Not withstanding a tail event such as 3), points 1) and 2) are how every retailer declares bankruptcy - see Toys'R'Us.

 

Various merchandise vendors restricted the Company's available trade credit and reduced payment terms; in some instances, the Company's terms were changed to cash in advance...the Company found it more difficult to sustain adequate product inventory and other store supply levels.

 

As has already been mentioned in this thread, the video game publishers hate GameStop - they want more of the economics for themselves. They'd, I think, be more than happy to put the squeeze on GameStop's vendor terms. Lets wait and see how Q4 and holiday sales go...if they are bad, GameStop will likely have to begin posting cash advances for product during their working capital intensive Q1 when they need to replenish all of their store inventory.

 

Significantly decreased availability under the Revolving Credit Facility...to pay vendors, the Company was forced to fund such payments, in part, through borrowings under the Revolving Credit Facility...because the Company was unable to purchase as much inventory as it otherwise would have had vendors not restricted trade credit and terms, the Debtor's availability under the Revolving Credit Facility, which is calculated based on, among other factors, inventory levels, decreased...In October, 2008, the Agent conducted a valuation of the Company's inventory. Using the new valuation, the calculation under the Revolving Credit Facility resulted in further decreased availability.

 

This is the classic catch-22 of asset based revolving credit facilities used by retail companies...vendors want more cash up front so to make the payments you fund with your credit facility...but, to turn around your business you're closing stores also and reducing the levels of inventory you need...the levels of which are what your credit facility availability is based off of.

 

For the third quarter, GameStop had credit facility availability of $413 million. This amount is calculated as 92.5% of the borrowing base, which is then implied to be $446 million. The credit facility borrowing base is secured by all U.S. inventories. GameStop doesn't disclose this exactly, but Q3 inventory was $1.3 billion and U.S. sales make up ~70% of total sales, so lets call U.S. inventory approximately $900 million. To arrive at the borrowing base the banks are valuing this inventory at approximately 50 cents on the dollar, which really tells you something about GameStop's book value. If comparable store sales, total store sales, and most importantly, the gross margin on used video game sales continues to decline I wouldn't be surprised to see the banks reassess their valuation of inventory down to 25 - 30 cents on the dollar, and that would have a massive affect on GameStop's credit facility availability and their ability to fund, what I expect to be, significantly stricter vendor terms...see, catch-22.

 

Additional liquidity was not available through traditional channels, such as the credit markets...due to the widespread liquidity crisis...drastic effect on sales because 75% of the Company's sales are generated through credit card purchases.

 

This section is not totally comparable because there was a credit crisis which really did seize up traditional avenues of capital. Given the growth of non-bank private credit firms I am certain GameStop could find an, albeit very expensive, source of emergency capital if they really needed it. There are some really creative guys out there when it comes to that. But, the other point which is interesting is how much of Circuit City's sales were generated through credit card purchases. I'm not sure if GameStop discloses this, but I'm sure its probably a comparable amount in this case.

 

Without immediate relief, the Company is concerned that it will not receive goods for Black Friday and the upcoming holiday season.

 

Here is the crux of the issue...Circuit City filed bankruptcy because they needed to obtain emergency financing in the form of a DIP so they could stock their shelves for the busy Q4 holiday season. It really doesn't take much imagination to see the path that GameStop is going down and think they maybe they might find themselves in a similar situation when it comes time to prepare their store base for the 2020 holiday season...

 

So, hopefully this illuminates that there really are a lot of similarities between Circuit City and GameStop. I really don't think anyone is paying attention to the vendor financing / credit facility availability angle of GameStop...

[Gregmal]

While GME is definitely challenged, the H2 2008 comparison is laughable. Pretty much everyone was having a liquidity crisis at that point in time.

[johnny]

The vendor confidence thing is a key component here that is different. Gamestop's vendors are either very well capitalized hardware companies (who are not going to be put in a position to "pass down" any liquidity anxiety) or software companies who have almost no cash basis in the inventory being supplied. $100M of retail inventory probably represents $10M or less in actual dollars spent by any game publisher, so there aren't many counterparties here that are staying up at night wondering how they're going to make payroll if Gamestop fails a bit faster than anticipated.

 

Compare to a car audio manufacturer who, in the midst of a crisis, may be seriously fucked if Circuit City decides to delay paying them for head-units or whatever low-margin gear they had to finance the manufacture of two quarters ago.

 

A few years ago I considered it obvious that Gamestop was doomed, in large part because everybody would be eager to cut out the middleman. Now I think it's clearer to the software side that they may not be winners in the new world. Online distribution empowers platform owners, but leaves individual software creators in a pretty weak position that seems to result in highly promotional pricing. In other words, I think on the software side a lot of players are realizing they may be longing for the days when Gamestop was selling their titles for $50 and taking a 50% cut. I'm not saying this is going to stop the transition, simply that there may be less incentive to accelerate the transition by some of the players.

 

That leaves the platform owners who are indisputably soaking up the power and margin from the digitalization trend. Would Sony or Microsoft consider a high-visibility implosion of Gamestop to be in their interests? It's not obvious to me what the answer here is. Might it be perceived as taking a bit of shine off of their next-gen console launches? There is some marketing value to having a bunch of local NBC affiliates do the exact same story on "look at this line of tents in anticipation of the launch of Product X". And Gamestop is obviously an important piece of that puzzle. To contextualize: my guess is that the aggregate marketing spend for gaming in 2020 will be more than Gamestop's current market cap. It's not nothing; it at least suggests to me they might be incentivized to allow for Gamestop to gracefully decline and (attempt to) execute their strategy of buying back 150% of their shares. Again, the fact that the full digitalization of the industry is more or less inevitable means the players that stand to benefit from it may not feel any need to push it forward by a year or two.

 

Finally, I've come to appreciate that substantially less than 100% of Gamestop's sales will be "made up" in digital. As gamers move more and more towards digital, Gamestop increasingly becomes a specialty channel for price low information and price-insensitive purchasers. Grandpa and Grandma run into Gamestop and spend $59.99 on a game for a 9 year old who could have easily executed the purchase for $30 if they had their own bank account, etc. Everybody is sort of a winner in this scenario, except the boomers. I know my nephew owns multiple licenses of the same game, in large part because of how totally befuddled boomers seem to be by this multi-modal software distribution world.

 

None of this should be considered a long argument by any means. I'm just thinking solely about vendor incentives in 2019-2020. I hope it is obvious I also know nothing about Circuit City except what was mentioned in this thread, as I was spending all of my time actually playing video games back when that happened.

[Spekulatius]

While GME is definitely challenged, the H2 2008 comparison is laughable. Pretty much everyone was having a liquidity crisis at that point in time.

 

There are pockets even right now, where liquidity is an issue. Failing retailers and mortgage MBS for failing malls are two  pockets where liquidity has been disappearing.

[thepupil]

bonds are back up to $98 / high 7% yield. I  ultimately have decided to not short them because IBKR is charging too much margin against them ($75K of margin to be short $100K par). I don't understand this given the low maximum loss in being short a short duration bond at $98 / $100. Maybe it's because my taxable account is not big enough, but just wanted to alert anyone to this as an interesting hedge to HY/general market. I think it's low probability of default, but the downside is you lose 7% per year pre-tax.

 

 

[5xEBITDA]

bonds are back up to $98 / high 7% yield. I  ultimately have decided to not short them because IBKR is charging too much margin against them ($75K of margin to be short $100K par). I don't understand this given the low maximum loss in being short a short duration bond at $98 / $100. Maybe it's because my taxable account is not big enough, but just wanted to alert anyone to this as an interesting hedge to HY/general market. I think it's low probability of default, but the downside is you lose 7% per year pre-tax.

 

I see bonds trading at 97 1/4 today with bids at 96 3/4 and lower - slight semantic, your overall point remains. It was sort of a no brainer to hit the bid when the bonds dropped to ~92/93...there was a lot of insurance fund / sleepy HY selling and the credit has entered "crossover" zone and guys are now really starting to do work on GameStop. I'd expect the bonds to keep trading lower after what will most likely be an awful holiday season. Next catalyst date should be the 2nd or 3rd week of January when holiday results are released in an 8-K.

 

The guys who are buying don't really understand the problems the business has and they've totally bought the ~$200+ million of free cash flow by the end of the year line - its just not going to happen. 

[RadMan24]

traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

 

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

 

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

 

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

 

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

 

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

 

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

 

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

 

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

 

 

Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

 

Gee, wonder which one would struggle of there was a credit crisis.

 

Would you rather a Blockbuster comparison which is probably more apt? This is 2019. The internet exists. It is in game creators' best interest to cut out GME. What could possibly turn the revenue trend around? What melting retail company has managed to close down expediently to return cash to shareholders in the face of complete technical obsolescence regardless of balance sheet strength?

 

 

Gamestop's retail demise has been talked about for almost a decade. No one has been right. Sure, Gamestop might not exist one day, but using this whole Circuit City, Blockbuster example time in time again on Gamestop isn't working. You should stop and ask yourself why that is.

[thepupil]

Were there spin-offs or big dividends?

 

The stock is down ~91% on a price basis from peak  over 5 years.

 

Recognizing that investment is forward looking, i’d say those calling for the company’s demise have been correct, no?

 

I am confused why you say that the comparisons to defunct retaileres aren’t working. If anything GME is exhibiting far greater fundamental deterioration than CC did with its -6% comps pre BK (I know people are deferring console purchases, but it illustrates GME’s fundamental cyclicality)

 

I actually have no opinion on how things shake out, just think it’s dumb to lend to this company to get through another holiday season  to make 7-8%, particularly with the company on a mission to distribute its cash to equity holders

 

If I were long stock, I’d still short the bonds.

 

Why is the comparison to a secularly challenged retailer that went bankrupt despite little financial debt not relevant?

[RadMan24]

Were there spin-offs or big dividends?

 

The stock is down ~91% on a price basis from peak  over 5 years.

 

Recognizing that investment is forward looking, i’d say those calling for the company’s demise have been correct, no?

 

I am confused why you say that the comparisons to defunct retaileres aren’t working. If anything GME is exhibiting far greater fundamental deterioration than CC did with its -6% comps pre BK (I know people are deferring console purchases, but it illustrates GME’s fundamental cyclicality)

 

I actually have no opinion on how things shake out, just think it’s dumb to lend to this company to get through another holiday season  to make 7-8%, particularly with the company on a mission to distribute its cash to equity holders

 

If I were long stock, I’d still short the bonds.

 

Why is the comparison to a secularly challenged retailer that went bankrupt despite little financial debt not relevant?

 

Right, let's play your game. Where was everyone expecting Gamestop's demise when the stock was in its 40s, 30s? They were all over gamestop when it was in its 20s and high-teens in 2012 only to get burned like a crisp. Same folks, different people, are predicting the same at the end of a console cycle. Good luck!

[thepupil]

I have literally no position here but am genuinely confused by your tone and don’t quite understand your view.

 

What game am I playing?

[Spekulatius]

 

 

Right, let's play your game. Where was everyone expecting Gamestop's demise when the stock was in its 40s, 30s? They were all over gamestop when it was in its 20s and high-teens in 2012 only to get burned like a crisp. Same folks, different people, are predicting the same at the end of a console cycle. Good luck!

 

Most people just stayed away from stocks like GME. The issues with GME were apparent a long time ago:

https://www.siliconinvestor.com/readmsg.aspx?msgid=26866701&srchtxt=GME

[Gregmal]

And to boot, most the people shorting GME in 2012 or so were also likely shorting Best Buy. Like has been said plenty of times, shorting is not really a great game to play. The deck is stacked, and while I doubt anyone is ever able to put together an honest study, I'd wager you're better off going to the casino than shorting.

[5xEBITDA]

Were there spin-offs or big dividends?

 

The stock is down ~91% on a price basis from peak  over 5 years.

 

Recognizing that investment is forward looking, i’d say those calling for the company’s demise have been correct, no?

 

I am confused why you say that the comparisons to defunct retaileres aren’t working. If anything GME is exhibiting far greater fundamental deterioration than CC did with its -6% comps pre BK (I know people are deferring console purchases, but it illustrates GME’s fundamental cyclicality)

 

I actually have no opinion on how things shake out, just think it’s dumb to lend to this company to get through another holiday season  to make 7-8%, particularly with the company on a mission to distribute its cash to equity holders

 

If I were long stock, I’d still short the bonds.

 

Why is the comparison to a secularly challenged retailer that went bankrupt despite little financial debt not relevant?

 

Right, let's play your game. Where was everyone expecting Gamestop's demise when the stock was in its 40s, 30s? They were all over gamestop when it was in its 20s and high-teens in 2012 only to get burned like a crisp. Same folks, different people, are predicting the same at the end of a console cycle. Good luck!

 

Here are two GME short theses from 2013 and 2014, one with the stock at $33 and the other at $37.

 

https://www.valueinvestorsclub.com/idea/GAMESTOP_CORP/3191613313

https://www.valueinvestorsclub.com/idea/GAMESTOP_CORP/3808584834

[cameronfen]

And to boot, most the people shorting GME in 2012 or so were also likely shorting Best Buy. Like has been said plenty of times, shorting is not really a great game to play. The deck is stacked, and while I doubt anyone is ever able to put together an honest study, I'd wager you're better off going to the casino than shorting.

 

Ya but if I'm understanding him right thepupil's whole point is shorting bonds and shorting stock are two different games.  Your downside is capped with bonds unlike with the equity. 

[Gregmal]

And to boot, most the people shorting GME in 2012 or so were also likely shorting Best Buy. Like has been said plenty of times, shorting is not really a great game to play. The deck is stacked, and while I doubt anyone is ever able to put together an honest study, I'd wager you're better off going to the casino than shorting.

 

Ya but if I'm understanding him right thepupil's whole point is shorting bonds and shorting stock are two different games.  Your downside is capped with bonds unlike with the equity.

 

Thats probably the right way to play it. Perhaps even hedge a bit more by going long a small fraction % of shares relative to the bond.