GameStop’s Massive Surge Creates A New Billionaire As Wall Street Bets Against Reddit…


Fueled by a massive short squeeze pinning Reddit traders against a storied Wall Street short-seller, a mindblowing rally in GameStop shares has minted a new billionaire in Ryan Cohen, an activist investor eager to forge a turnaround for the brick-and-mortar gameseller.

According to filings, Cohen—the founder and former CEO of Chewy, the booming e-commerce firm focused on pet supplies–spent about $76 million buying up more than 9 million GameStop shares at the tail-end of last year as he mounted an effort to restructure the Grapevine, Texas-based firm. 

“Unfortunately, it is evident that GameStop currently lacks the mindset, resources and plan needed to become a dominant sector player,” Cohen said in a public letter to GameStop’s board of directors in November, blasting the stock’s dismal performance at the time—it was down 85% over the prior five years. “GameStop needs to evolve into a technology company that delights gamers and delivers exceptional digital experiences–not remain a video game retailer that overprioritizes its brick-and-mortar footprint and stumbles around the online ecosystem.”

It’s unlikely that Cohen, or anyone for that matter, could have predicted what would play out over the next couple of months. GameStop shares are up more than 800% since his declaration, and the value of Cohen’s stake has skyrocketed to about $825 million. Tack that onto the proceeds Cohen received from PetSmart’s $3.4 billion acquisition of Chewy in 2017, and Forbes estimates the 35-year-old is worth about $1 billion. A spokesperson for Cohen said he was not available for an interview at press time.

Given how volatile GameStop stock has been, it’s not clear how long Cohen will hold onto his billionaire status. But, for now, GameStop keeps climbing. Shares are up a staggering 25% as of 12 p.m. Tuesday, after climbing 20% Monday. Analysts are pinning the gains to a surge in interest from retail investors, which has in turn fueled a short squeeze. In other words, institutional traders that were betting against the stock are now buying borrowed shares to cut their losses or secure gains on the possibility that the firm could actually be in for a turnaround.

Retail traders, meanwhile, have lauded Cohen’s involvement, with Reddit discussion boards including r/WallStreetBets (which counts more than 2 million members) revealing a slew of bullish at-home traders driving up the stock’s price despite widespread bearishness from institutional investors. The momentum came to a head in recent days, after storied Wall Street shop Citron Research went public with a short on GameStop shares at $20, about one-fifth of current levels–a move that triggered so much online backlash that the shop’s founder said he turned in threatening comments from “an angry mob” of shareholders to authorities. 

“The retail trader just picked a fight with Citron and won,” Oanda Senior Market Analyst Edward Moya said Monday of the “crazed buying” behind GameStop’s meteoric rise. “What’s happening with GameStop’s stock is a reminder of how times are changing: A new army of traders are not focused on valuations, but rather by momentum opportunities they see from Reddit’s Wall Street Bets, Youtubers, TikTok or Robinhood.”

In the meantime, Cohen’s just getting started with GameStop. His growing investment helped him nab three seats on GameStop’s board earlier this month–one for himself and two for a couple of his former Chewy executives. 

The son of a teacher and a glassware importer, Cohen got his entrepreneurial start at the age of 15, collecting fees for referring customers to e-commerce sites. About a decade later, in 2011, he founded Chewy and pushed to expand its volume from the start, pulling in 3 million patrons by 2017. 

“We’ll be done growing when we’re 6 feet under,” he said in a 2017 interview with Forbes, a few months before he sold the business to PetSmart.

Reddit traders seem convinced he’ll bring the same growth to GameStop, but analysts are much more skeptical. The average GameStop price target, from eight analysts issuing such guidance, remains about 80% below current price levels. “It doesn’t make business sense,” Doug Clinton, the cofounder of Loup Ventures, told Bloomberg Monday of GameStop’s retail trading frenzy.

Still, the frenzy has proved fruitful for new billionaire Cohen–even if at the whim of an insane social media battle. And even if the outcome remains incredibly unclear. 

“Gamestop shorts and longs are in a knockout battle being waged in the stock market–and social media platforms,” S3 Partners Managing Director Ihor Dusaniwsky said Monday, noting that short-sellers betting against the stock are down about $5 billion this year. “Both sides are holding their ground with strong conviction, but in the end, one side will be the outright winner, and in the later rounds of this fight, the long shareholders are way ahead.”




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