What's the deal with Gamestop?

Don’t cover but the stock has been in my PA a for a little over a year. To understand the recent huge jump, I think it’s important to understand the bear thesis. To me, there were two parts of the bear thesis, one of which is not a big near-term risk now: secular decline of the physical gaming industry and potential bankruptcy resulting from historically poor capital allocation decisions.

That being said, GameStop was always seen as a huge turnaround play before Burry, but Burry wanted to get in front of a catalyst. In early 2019, the company brought on new management to close stores and cut expenses. In mid 2020, activists Hestia and Permit achieved board seats after being longtime investors. Even Julian Robertson was involved at some point long ago. 
 

The new console cycle starting holiday 2020 helps pad further hits from the secular decline. As for the potential BK, the company has refinanced half of its callable bonds due 2021 out to 2023, buying some time to hopefully use the cash generated from the new console cycle to pay it off. Excluding leases, the company is also net cash positive I believe.

The recent jump initially started when GameStop started taking PS5 preorders. Importantly, the new consoles had disk drives, which could prolong the GameStop ecosystem (software sales are higher margin, software can be traded in, etc). Online, the system sold out, and social media pictures showed lines forming outside GameStop.

The next leg up was the unveiling of Ryan Cohen’s, founder of Chewy, stake in the company. Investors speculated that he would try to accelerate GameStop’s e-commerce, which was already trending positively in the midst of COVID. 13-D filings such as the one you’ve cited with Burry have tended to move the stock up albeit temporarily. An additional disclosure showed that Cohen had spoken with the company and wants to have them compete with Amazon somehow. This helped lift fears of a secularly declining business.

Finally, the Microsoft deal most likely inspired confidence that GameStop would be here to stay longer than expected. I originally got in expecting it to be a melting ice cube and wanted to play the combination of poor sentiment and huge short interest. The logic of the increased confidence is that Microsoft probably would not want to do a deal with a business that won’t exist after the next few years.

This flurry of news in a relatively condensed time frame in front of the new console releases most likely caused some short covering and retail interest (WSB). As for the 100% short interest of float, I’m not entirely familiar but I’ve read that shares can be lent out more than once, which would explain it. There’s definitely more to this story, but this probably covers the recent events.