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GameStop Corp. Message Board

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  • Reply to

    Question on the buyback

    by dc_rachel Dec 24, 2014 11:26 AM

    Hello razor_05 and dc_rachel,

    Everything that razor_05 just said is exactly right plus there are a few more things to consider.

    * A short position actually creates more shares of the stock in a virtual way.
    * A large short position (like GME) can create silly situations where institutions own more than 100% of the stock (also like GME).
    * When you have a short position in your account, that means you sold the stock and someone bought the stock and because you artificially created the stock that you sold, you must pay the dividend. (Got that? Anybody shorting GME today would have to pay a 4% dividend for as long as they held their position).

    So, for the reasons listed by razor_05, plus the items listed herein, and because over 100% of the float is owned by institutions, and because such a huge percent of the stock is shorted, I think what is in play here are huge institutional Straddles.

    A straddle is the right strategy when you expect high volatility but don't know which way it will break.

    Yep, I think the deep pocket longs are also the big shorts. Bull or Bear, it soars or crashes, all based on Christmas.
    MBA

  • Reply to

    Question on the buyback

    by dc_rachel Dec 24, 2014 11:26 AM

    Yes. At ~40%, GME's short interest is among the highest in the S&P 500. Short interest = shares sold short divided by shares outstanding.
    Note that this is a strong contrarian indicator for many long investors because it reflects how bad sentiment is. A whiff of good news will send the stock soaring as shorts race to cover their bets. This phenomenon can feed on itself in a short squeeze.
    It's also worth pointing out that for longs, downside is equal to the share price, but for shorts the downside is theoretically infinite. This changes the psychology of shorting versus being long enormously. If you're not dead right, the losses can keep piling up with no end in sight. And when a short starts to turn against you, it's very hard to keep the trade on.

  • Reply to

    Question on the buyback

    by dc_rachel Dec 24, 2014 11:26 AM

    Thanks! Do you think a lot of people are shorting Gamestop now?

  • Reply to

    Question on the buyback

    by dc_rachel Dec 24, 2014 11:26 AM

    the number of shares available to buy (and borrow and short) goes down when the company buys back stock. People who are short the stock aren't shorting the stock to sell it back to the company necessarily because that's not their objective. To short a stock, a person needs to borrow it from someone who owns the stock and then sell it in the open market. That person is betting that the price will go down and that he/she can buy it back later ("cover") and return the borrowed shares.

  • Concerning traders taking a short position, are these traders borrowing shares to sell back to the company? If so, are these shares no longer available to the public? What happens then? Thanks and Merry Christmas!

  • Reply to

    Tytus your sales and profit numbers and price target

    by jk4763 Dec 24, 2014 10:22 AM

    not by February, In february we will see 50

    under 3 earnings would be 285m annually, will be a lot more

  • The action in this stock is perplexing at times. I would guess it is pushed around each day by the bigger funds like a play toy.

  • the AAA game publishers are more like media companies than IT companies. The cost to develop the games is enormous, often exceeding the cost to develop a big Hollywood movie. And the distribution of AAA games is analogous to the movie industry, too. Movies have a window period for release in theaters, when they typically garner most of their sales, before being released into a discounted format like DVD, Netflix, HBO, etc. So, too, it is with AAA games. The big dollars flow to the console game publishers soon after release, before the discounting starts through used game channels.
    To understand how expensive it is to develop these games, look no further than the income statements of the publishers. I understand that the incremental cost to replicate a game once developed is essentially zero. The point is that the upfront cost is massive.

  • Reply to

    Tytus your sales and profit numbers and price target

    by jk4763 Dec 24, 2014 10:22 AM

    Online downloading of games is what is killing GME.

    http://www.nasdaq.com/article/what-activision-and-ea-dont-want-you-to-know-about-their-surging-digital-video-game-sales-cm426633

  • each day are looking more and more unlikely. I give GME a 1% chance of hitting 50 by February. I believe eps will be revised to under $3 next year. all my opinion.

  • Reply to

    GME Having A Great Christmas In Sales

    by tytus1212 Dec 24, 2014 8:47 AM

    Good Morning tytus1212,

    Though I am on the opposite side I will grant you this much, the stores are absolutely packed. At least here in Westlake Ohio they are. Cannot find a single parking spot at the mall all week long. I think that retail sales numbers for retailing as a whole are going to be much higher than expected.

    That of course is a good omen for GME. Yet I do not know a single person who planned any Christmas shopping at all at GameStop. And I've asked around. If U.S. holiday sales are up, and GME sales are not, what kind of omen would that be?

    Bull or Bear, it all depends on this Christmas.
    MBA

  • Reply to

    GME Having A Great Christmas In Sales

    by tytus1212 Dec 24, 2014 8:47 AM

    Your opinion is welcome: I see a company moving to 95m shares or fewer quickly. Float will be negligible, better margins and expanded technology products with higher margins. I suggest that when this stock hits 40 in the next couple weeks to set a stop loss so you can reach the 50 plus price. good luck

  • Reply to

    GME Having A Great Christmas In Sales

    by tytus1212 Dec 24, 2014 8:47 AM

    Please Tytus.. Its nice you are a paid pumper however your numbers are unrealistic. If this stock ever hits 40 again im cashing out. You will never ever see 50 on GME in the next 2 months. Christmas, busiest time of the year and the stock hit new lows.. That tells me margins are not even close to what you think they are.

  • Stores are packed
    Great flyers offering many new technology items
    Margins are much better
    Secondary sales after Christmas will be great- cash to kids to buy more games
    This stock could actually bypass 50 sometime in February headed toward 60's
    Dividend will be 3% or greater sometime in 2015 / shorts will be hung having pretty much zero float soon

  • From Yahoo Insider Transactions:

    Dec 8, 2014 KOONIN STEVEN R
    Director
    1,800 Direct Automatic Sale at $35.46 per share. 63,828
    Dec 1, 2014 SHERN STEPHANIE M
    Director
    10,333 Direct Automatic Sale at $36.18 per share. 373,847
    Dec 1, 2014 SHERN STEPHANIE M
    Director
    10,333 Direct Option Exercise at $17.94 per share. 185,374
    Oct 30, 2014 FONTAINE R RICHARD
    Director
    75,000 Direct Option Exercise at $10.13 per share. 759,750
    Oct 30, 2014 FONTAINE R RICHARD
    Director
    40,000 Direct Sale at $42.04 per share. 1,681,600
    Oct 1, 2014 ZILAVY LAWRENCE S
    Director
    3,500 Direct Automatic Sale at $40.96 per share. 143,360
    Sep 19, 2014 MAULER MICHAEL
    Officer
    14,070 Direct Option Exercise at $24.82 per share. 349,217
    Sep 19, 2014 MAULER MICHAEL
    Officer
    24,070 Direct Automatic Sale at $43.63 per share. 1,050,174
    Sep 19, 2014 DEMATTEO DANIEL A
    Officer
    150,000 Direct Automatic Sale at $43.63 per share. 6,544,500
    Sep 19, 2014 KOONIN STEVEN R
    Director
    1,800 Direct Automatic Sale at $43.63 per share. 78,534
    Sep 19, 2014 LLOYD ROBERT ALAN
    Officer
    20,000 Direct Automatic Sale at $43.63 per share. 872,600
    Jul 17, 2014 KOONIN STEVEN R
    Director
    2,100 Direct Automatic Sale at $41.26 per share. 86,646
    Jul 1, 2014 ZILAVY LAWRENCE S
    Director
    3,500 Direct Automatic Sale at $40.49 per share. 141,715
    Jun 27, 2014 FONTAINE R RICHARD
    Director
    125,000 Direct Option Exercise at $10.13 per share. 1,266,250
    Jun 27, 2014 FONTAINE R RICHARD
    Director
    90,000 Direct Sale at $40.42 per share. 3,637,799
    Jun 24, 2014 SHERN STEPHANIE M
    Director
    3,480 Direct Acquisition (Non Open Market) at $0 per share. N/A
    Jun 24, 2014 FONTAINE R RICHARD
    Director
    3,480 Direct Acquisition (Non Open Market) at $0 per share. N/A
    Jun 24, 2014 KOONIN STEVEN R
    Director
    3,480 Direct Acquisition (Non Open Market) at $0 per share. N/A
    Jun 24, 2014 KELLY THOMAS N JR
    Director
    3,480 Direct Acquisition (Non Open Market) at $0 per share. N/A
    Jun 24, 2014 KIM SHANE
    Director
    3,480 Direct Acquisition (Non Open Mark

  • Good Evening Razon_05,

    I confess to manufacturing the number $15 but I do so with some knowledge. My profession is IT development and has been so for more than 30 years. The games are nothing more than IT applications and therefore I presume (maybe incorrectly) that the business model for them is the same as the model for any other IT.

    In IT, the estimated cost of development is amortized over the revenue from sales as follows: Total cost of development / estimated total sales. 15 % as you said is an absolutely unbelievable number (although I confess I have no particular inside knowledge of games). In IT software development, the number is more like hundreds of percent.

    Remember, after the software is developed the additional development cost for each sale is near zero. Therefore, based on my three decades of software development experience, I very conservatively believe that the cost of developing gaming software is no more than 25% of sales revenue and probably more like 5%.

    My point being that the developers of games can save at least 75% of retail game prices by download and still improve their profits. Legacy logistics for bits and bites has changed, permanently. It makes no sense at all to physically distribute objects with 50% markup for whole sale and another 50% markup for retail. Especially tiny, tiny overpriced low volume retail outlets.

    This is my opinion and not intended to be insulting to your opinion. Just wanted to share the thoughts and hear yours.

    MBA

  • Reply to

    Shorts Realize Around 33ish Is The Floor

    by tytus1212 Dec 23, 2014 11:40 AM

    Sorry to tell you it wont buddy. Stock performing terrible.

  • Dear MBA, everything you mention here is just a bunch of #$%$.

    1. The top management isn't selling their shares...the old management from like 15 years ago is the one selling their shares....Raines and others have sold but in the mid 50's and haven't sold since...your info is really misleading here...

    2. issuing stock pumping press releases? You mean the retail deals???? They don't mention stuff like they are are signing bogus exlcusive agreements...they talked about closing Spain, working with Cricket and purchasing simply mac and other dealers...that isn't pumping that is real news...in fact the tech brands segment will have 1 billion in revenues and each business on its own can generate more than 1 billion in revenue...and these businesses aren't for 2 to 3 years....in fact i wouldn't be surprised if AT and T sells all of their company owned cricket wireless stores to gamestop if they can prove gamestop can manage them better...there is so much here to this story that you are missing...

    as for buybacks...well...lets be clear they have bought back more than 1.8 billion of their stock...meaning that if this company was taken private in 2012 at 20 dollars a share or at about a 3 billion valuation they would have essentially gotten a 100% return with buybacks and dividends..UNLEVERED...the leverage on this company wasn't to buy back stock....they wanted to take advantage of low interest rates and did so...they were asking for 250mm and demand was so strong it went to 350mm they could pay that off in one years worth of earnings...not many companies in the USA can do that...

    again, all of your statements are misleading...you have to spend hours and hours at the store and talk to customers....

    A bet on GameStop is a bet on the low income demographic and one thing I know about that demographic is that they are very conscience about their spending and savings.....GameStop offers an excellent value compared to Amazon and other retailers....

  • Where do you get that $15 number? The publishers earn 15-20% profit margins currently and profits have been a lot less than that historically. If they were to sell a game for $15 that they now sell for $60 through GME (which makes say a 15% on software), the publishers would quickly go out of business, no?

  • Hello Andrewsoc,

    The reason why the digital download is $60 instead of $15 is because the manufacturer cannot undercut his own customer (the retail stores) without alienating them. However, the writing is on the wall. You cannot forever charge $60 for a $15 product without someone breaking rank. If not Americans then Russians or Chinese or Europeans or someone, somewhere will provide very high quality content to the whole world at prices reflective of a near-zero cost distribution system.

    Trust me when I tell you that for me, going short on a company with GREAT numbers like GME has taken guts. Hearing the story about this being the next Blockbuster got me looking. But seeing what GME management is doing convinced me.

    GME Management:
    * is selling their own shares...
    * is issuing stock pumping press releases...
    * is doing the IBM trick of buying back shares on borrowed money to pump up EPS...

    I absolutely agree with you that the trailing numbers make this stock look like the bargain of all bargains. However, I agree with those that say that modern logistics is against them and management is behaving fishy.

    All JMHO.
    MBA

GME
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