Stock prices for GameStop (NYSE:GME) spiked to $4.22 a share on Thursday before settling at $3.67 the day after Michael Burry, the investor whose prediction that the real estate market would collapse in 2007 was the subject of Michael Lewis’ book and subsequent film The Big Short, revealed he owned 3.05% of the company’s stock.

Burry sent a letter to GameStop’s board of directors urging them to buy back the rest of the company’s $237 million worth of stock using some of the $480 million he estimates the company has on hand. The move would bolster shareholders who Burry said “are right to worry” about the fate of the company. He went on to detail the long history of financial missteps that has led to GameStop’s decline including investing in wireless stores in 2014 instead of Twitch, which was purchased by Amazon that year. GameStop has since sold most of those assets while Amazon has strengthened its hold on the market by purchasing game data service GameSparks in 2017.

While Burry expects GameStop will see an increase in sales over the next two years due to new console releases, he said that shareholders do not have faith in the company’s management. GameStop stocks hit an all-time low of $3.60 a share on August 9 and then continued to decline, opening this week at $3.23 per share. Prices rallied slightly on Wednesday to close at $3.54 per share after the company announced it was eliminating 120 corporate positions. The company also laid off several senior editors at its gaming magazine, Game Informer.

A GameStop Reboot turnaround effort has been in effect since June. The goal is to cut costs and develop new revenue sources to make up for the decline in physical game sales as more customers move to digital downloads. It’s a crisis only likely to grow as the launch of new game streaming services increases the ways for consumers to play the latest titles without setting foot in a store.

Samantha Nelson
Managing Editor at Escapist Magazine. Contributor at Gaming Street, A.V. Club, The Verge, Collider and the Chicago Tribune.

    You may also like

    More in Investing