GME Stock Rises Premarket As Deal Speculation Builds

• A few traders on Stocktwits shared a message from Michael Burry saying that he bought more GameStop stock. The original message is not available on Burry’s social channels.
• Hedge fund manager Steve Eisman said GameStop’s acquisition plan is fraught with uncertainty.
• Stocktwits sentiment for GME dipped to ‘bearish’ from ‘neutral.’

GameStop shares inched 0.2% higher after initial volatility as the premarket session opened on Monday, with investors scouting for signals for the company’s impending acquisition.

In January, GameStop CEO Ryan Cohen had expressed interest in buying a publicly listed retail company. Even as the company’s total assets, including cash, swelled to over $10 billion, it had not made an acquisition until last month.

Rather, the company acquired about $2.7 billion in “marketable securities.”

Mixed Reaction To GME’s Acquisition Play

On Stocktwits, the chatter around a potential deal was heavy even though the retail sentiment dropped to ‘bearish’ from ‘neutral’ the previous day. 

Some traders reposted a message from notable investor and GameStop backer Michael Burry, saying he had bought more shares and expected GME and its warrants to rally once the deal is announced. Burry’s original message did not show up in Stocktwits research, including on his Substack page.

Meanwhile, hedge fund manager Steve Eisman, who, like Burry, is famous for betting against the U.S. housing market before the 2008 financial crisis, is not convinced about a GameStop rebound.

Speaking on his podcast, posted on YouTube, Eisman said that betting on the retailer to buy profitable businesses is a “pipe dream.”

“I do not find this argument compelling at all,” Eisman said, addressing the company’s growing cash pile. “Maybe they buy something good, and maybe they buy something not so good. Maybe they buy something at a good price, and maybe not. Too many maybes for me.”

Eisman stressed that GameStop is fundamentally a “declining business,” as the industry continues its long-term shift toward digital downloads and online sales.

GameStop Business In Decline

Speculation about the deal has built even as GameStop’s underlying business continues to shrink. Revenue fell 14% to $1.10 billion last quarter, while profit declined to $127.9 million from $131.3 million.

In keeping with recent quarters, sales of hardware, accessories, and software declined, while collectibles revenue grew. Collectibles now make up about a third of total sales, up from 21% a year before.

As of the last close, GameStop shares were up 16.3% year to date.

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