GameStop became the face of the “meme stock” craze early this year, when a fanatical band of smaller-pocketed and novice investors encouraged each other to pile in. That helped trigger a “short squeeze,” which sent the stock flying.
Professional investors had sold much of GameStop’s stock “short,” essentially making bets that would profit if its price were to fall. They were skeptical GameStop had a bright future given the migration of video-game sales toward online channels and away from GameStop's stores. But after the stock began rising sharply, those short sellers had to buy GameStop shares to get out of their bets, which created a feedback loop further goosing the share price.
The stock set a record closing high of $347.51 in late January, but it sank back below $41 within a few weeks. It’s since climbed again and closed Wednesday at $302.56.
GameStop reaped the benefits of that surge by selling stock earlier this year to raise nearly $552 million. That helped the company end its latest quarter with $770.8 million in cash and restricted cash. GameStop said it plans to use its increased financial strength to accelerate its transformation. It already has eliminated all its long-term debt.
GameStop didn’t provide an earnings forecast and it said it believes sales growth is the best way to measure its performance. The company said sales in May rose about 27% above last year.
GameStop’s stock slipped 7% in trading after the market’s close.