Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Eisenthal and I'm Tracy Hallaway. Tracy, we're finally
Speaker 1: doing it. We're finally recording the episode. The episode. Uh well, yeah,
Speaker 1: it's definitely what everyone is talking about, isn't it. It's
Speaker 1: the only story in financial markets right now. We've got
Speaker 1: a million requests to do it. We're talking about game
Speaker 1: Stop obviously. Yeah, where to even begin describing this. There's
Speaker 1: a subreddit called Wall Street Bets. Yeah, and a bunch
Speaker 1: of people on the subreddit decided to trade game Stop. Um.
Speaker 1: There are a bunch of different theories about why they
Speaker 1: looked at that particular stock, but what's happened since then
Speaker 1: is that they've basically forced it to go up by
Speaker 1: an astronomical amount. We've seen people on the other side
Speaker 1: of that trade, notably a hedge fund called Melvin Capital
Speaker 1: that had a big short position has suffered massive losses
Speaker 1: and basically had to be thrown a lifeline by some
Speaker 1: other hedge funds. And meanwhile, we've seen this phenomenon of
Speaker 1: I guess social media fueled UH specific stock targeted trading,
Speaker 1: this retail trading on mass We've seen that extend to
Speaker 1: a lot of other stocks in the market, amc American
Speaker 1: Airlines and Okay, there there's a lot going on right now.
Speaker 1: I don't even think I did it justice. Let's just
Speaker 1: say it's the craziest week I've seen in markets in
Speaker 1: my entire career. Yeah, I think that's right, is it?
Speaker 1: You know, we've we've both seen crashes at times in
Speaker 1: our career, but crashes are familiar things. We there's they're common,
Speaker 1: they happen. We have never really seen anything like this,
Speaker 1: the perfect storm that's come together with hedge funds, Shore
Speaker 1: being a stock, social media driving it to the moon,
Speaker 1: and then the trade itsself becoming a meme driving it
Speaker 1: even higher, causing all kinds of lawses hedge funds not
Speaker 1: just covering their shorts but liquidating their winners to maintain
Speaker 1: within their volatility parameters. The story is everything, and now
Speaker 1: we're going to dig into it. Okay, I'm excited. There
Speaker 1: is There's one big question which I think a lot
Speaker 1: of people are focused on at the moment, and that's
Speaker 1: whether or not game stop and what's happening in a
Speaker 1: lot of other meme stocks at the moment, whether that's
Speaker 1: due to a structural weakness that reditors have basically identified
Speaker 1: and we've spoken about it on all thoughts before, or
Speaker 1: whether it's something more I don't know how to describe it,
Speaker 1: cultural or fundamental. Whether people actually believe that game Stop
Speaker 1: should be a by and the shares should be going
Speaker 1: up as much. Yeah, totally wild, all right. I am
Speaker 1: very excited because we are going to be speaking with
Speaker 1: a participant in the game Stop trade, the big Long,
Speaker 1: someone who has been bullish on the company for a
Speaker 1: while long, you know, while everyone else was saying the
Speaker 1: company he was dead, while everyone was saying this was
Speaker 1: gonna be the next blockbuster and go out out of business.
Speaker 1: Our guest today has been a believer for a while.
Speaker 1: So we are going to We'll just get right into it,
Speaker 1: no more through clearing. We're going to be speaking with
Speaker 1: Rob Alsman. He is a retail investor, but he is
Speaker 1: part of the crew that put together the website. Gm
Speaker 1: E d D dot com. D D stands for due
Speaker 1: Diligence g m E is the game Stop ticker where
Speaker 1: they collect the bull case four game Stop. He's been
Speaker 1: long game Stop for several years. He's starting when the
Speaker 1: stock was in the teens, he watched you go down
Speaker 1: stuck with it, and now finally the big long is
Speaker 1: paying off, paid off massively beyond anyone's expectations. We're going
Speaker 1: to talk about the trade. So Rod, thank you so
Speaker 1: much for joining us. Joe, Tracy's pleasure to be here.
Speaker 1: Love the podcast. It's kind of mind blowing that I'm
Speaker 1: on it with you right now. Well, it is kind
Speaker 1: of mind blowing for us to be talking with a
Speaker 1: participant in the game Stop trade. So let's start at
Speaker 1: the very beginning. Uh, you know a lot of people
Speaker 1: have been following this for the last week. As I mentioned,
Speaker 1: you've been following it for a few years, a long
Speaker 1: time game Stop ball. What attracted what's your background? How
Speaker 1: did you get into investing and market and how did
Speaker 1: you zero in on game stop specifically as a potential
Speaker 1: for a big payoff. Yeah, Joe, let me go rewind
Speaker 1: way back. I'm thirty one years old, so I've lived
Speaker 1: through an undergrad the financial crisis, but even before the
Speaker 1: financial crisis, I've always personally had an interest in markets
Speaker 1: and investing, kind of a nerd. I bought indirectly through
Speaker 1: my father as a custodian game Stop stocking around two
Speaker 1: thousand and three or so as my first ever investment
Speaker 1: as a matter of fact, and at the time it
Speaker 1: was purely a fun schinov. I'm a kid who goes
Speaker 1: in the mall and I see all these people, and
Speaker 1: I love video games, and I see how many other
Speaker 1: people seem to love video games, and great. I told
Speaker 1: him to buy it, and it paid off because they
Speaker 1: had a merger with that an acquisition with Electronics boutique
Speaker 1: in two thous five. The stock did pretty well up
Speaker 1: through you know, the financial crisis peak UM needed the
Speaker 1: money for college though, and liquidated before the crash thereafter.
Speaker 1: But bringing it up to today, what brought me into
Speaker 1: the story again in seventeen was pursuit of value. It
Speaker 1: was pursuit of what I perceived to be a mispriced
Speaker 1: opportunity in the market. That is, UM certainly born more
Speaker 1: fruit than I ever would have imagined. So you took
Speaker 1: a fundamentals viewpoint on the stock from the beginning. Take
Speaker 1: us back to when this trade idea first surfaced on
Speaker 1: Wall Street. Bets like, how are people talking about it?
Speaker 1: And what was the bowl case that got the whole
Speaker 1: trade started. So Tracy, I'll answer your question, but I
Speaker 1: want to be very clear that this There have been
Speaker 1: plenty of long investors, myself just one loud voice among
Speaker 1: them for a long time going back at this point.
Speaker 1: Year's plural, obviously seventeen. But but let's fast forward. I
Speaker 1: think one of the first big tipping points to me
Speaker 1: in terms of seeing people into the trade was around
Speaker 1: August of nineteen. So if we look, if we were
Speaker 1: to look at the chart, and you would see a
Speaker 1: massive decline in price that finally reached a crescendo or
Speaker 1: troughed down. I'm trying to look at the chart, and
Speaker 1: it's absurd right now with the current price action that
Speaker 1: even notice it. But the price got down to around
Speaker 1: four dollars at that time, and just given the going
Speaker 1: forward operations, given what we knew, we knew that the
Speaker 1: at that point, I believe it was public knowledge that
Speaker 1: the disk drives would be present on the next generation
Speaker 1: video gaming consoles, and to me, that was a huge deal.
Speaker 1: Michael Burry had an interview with you know, your your
Speaker 1: associate on Bloomer Opinion Desk, kim at in Barns at
Speaker 1: the time, and I read that in addition to other
Speaker 1: research I've been conducting and that to me, it was ironic. Actually,
Speaker 1: a couple of days prior to his letter and the
Speaker 1: interview and all of that being published in August, I
Speaker 1: was actually on vacation in Hawaii with my girlfriend or
Speaker 1: with our family. We were we were in Hawaii, and
Speaker 1: I was buying January one call options on game Stop
Speaker 1: because I saw this was so fundamentally mispriced and I
Speaker 1: saw a clear, a very clear catalyst coming in the
Speaker 1: fall holiday of So I was not the only one
Speaker 1: in hindsight I found this out. But but let me
Speaker 1: be clear, the Reddit Wall Street Bets furvor that's come
Speaker 1: about that was not the end all be all, you know.
Speaker 1: I'm happy to highlight the what I believe to be
Speaker 1: the key trigger with Wall Street Bets was. This is
Speaker 1: what I think is really interesting about this to me,
Speaker 1: and why one of the aspects about why I love
Speaker 1: this story because we talk a lot about this sort
Speaker 1: of maniacal or maybe weaponized call options buying that's associated
Speaker 1: with the Wall Street Bets community, a lot of people
Speaker 1: on robin Hood the effect that has on the stock,
Speaker 1: and we could talk about that more too, and I
Speaker 1: think that's a really important angle. We've talked about some
Speaker 1: other episodes. People should go back and listen to our
Speaker 1: Ben Eifford episodes about the options mechanics. But I love
Speaker 1: that in an era in which so many people talk
Speaker 1: about the death of the value trade or the death
Speaker 1: of value stocks, that for people like you, the other
Speaker 1: guy who's big on Wall Street, bets who's uh Wall Street,
Speaker 1: who's red a handle, I can't really say because it's
Speaker 1: not safe for work, the Worry Kitty because he's on
Speaker 1: YouTube and twit. Yeah, his Wall Street was read at one.
Speaker 1: We can't say for you and him, like when you
Speaker 1: go back and look at it, it was a classic
Speaker 1: disciplined value idea, the likes of which one would expect
Speaker 1: to see like at the Sown conference, put together by
Speaker 1: like an old school hedge fund manager. And and that's
Speaker 1: why I want to really highlight that it was so
Speaker 1: much more than what's come to be fervor and the energy,
Speaker 1: which we we need to talk about. I think it
Speaker 1: is an unprecedented thing, but but I think it does
Speaker 1: a disservice to folks like me, my my my friend,
Speaker 1: Roaring Kitty, others who did a lot of work over
Speaker 1: the years. And you know what, we took our licks
Speaker 1: for a long time, because this stock truly was shorted
Speaker 1: into oblivion when we think about the durable short interest
Speaker 1: at the level that it was at, I mean the
Speaker 1: price got below the net cash on its books for
Speaker 1: a while, like this company was trading as if management
Speaker 1: was on a mission to destroy it, even after all
Speaker 1: of these things happened along the way, such as a
Speaker 1: strategic review that led to them divesting their technology brands
Speaker 1: business heading into twenty nine, team, the appointment of a
Speaker 1: new management team taking some really really important s gen
Speaker 1: a reduction actions given the game Stop had become a
Speaker 1: very bloated physical footprint. So I think it's really unfair
Speaker 1: and it does a disservice to us. I've been talking
Speaker 1: about game Stop on different platforms over the years. Stocked
Speaker 1: wits I joined in eighteen and started talking about it there.
Speaker 1: I started talking about it on Seeking Alpha in nineteen.
Speaker 1: And I'm not the only one I know. There are
Speaker 1: plenty of others, and I'm going to do them a
Speaker 1: disservice not calling them all out by name. But it
Speaker 1: was a a loose communal effort of a lot of
Speaker 1: folks who felt like this was a contrarian play. This
Speaker 1: was a misunderstood, misprice security. That simply people weren't getting it.
Speaker 1: And look, we we benefited from things happening along the way,
Speaker 1: such as COVID. In fact, you know, I think game Stoff,
Speaker 1: you could make a very strong argument was a beneficiary
Speaker 1: of COVID, and Ryan Cohen opting in August to file
Speaker 1: a thirteen D saying he was not the largest shareholder
Speaker 1: with a nine percent stake. And obviously we can talk
Speaker 1: about what happened from then to now with Ryan, but
Speaker 1: I think those things were not part of the original thesis.
Speaker 1: And of course we all know thesis update you have
Speaker 1: to stay present, and I don't think the shorts ever
Speaker 1: updated their thesis. I think that's the big thing. When
Speaker 1: August came along and you saw this, you saw game
Speaker 1: Stop survived COVID, You saw and Cohen was clearly interested.
Speaker 1: This is not a person if you do your research
Speaker 1: on the man that does things on a whim. He
Speaker 1: had had, he had publicly noted he only held Apple
Speaker 1: and well well Spargo stock, and now he had a
Speaker 1: Game Stop to the mix. So that should tell you something, right,
Speaker 1: what was it about Game Stop that captured people's imagination?
Speaker 1: So you mentioned it's a contrarian play. You know, there's
Speaker 1: a huge short interest, so the professionals are betting against it.
Speaker 1: But for some reason, there's this group of individual retail
Speaker 1: investors that see value in it, and you know, kind
Speaker 1: of deal with it differently to a lot of other companies,
Speaker 1: UM that you might say are undervalued. What was special
Speaker 1: about Game Stopper or what happened to UH to spark
Speaker 1: that sort of UM community or movement. I think you
Speaker 1: have to highlight COVID and I would. I definitely would
Speaker 1: highlight Roaring Kitty as the host if I'm sure you all.
Speaker 1: I know I've seen his videos cited in a few places.
Speaker 1: But to know the full story, you need to appreciate
Speaker 1: that this guy and I don't even know his real name. UM.
Speaker 1: I have spoken with him via d M, but you know,
Speaker 1: I know he's a private person and I'm not trying
Speaker 1: to pry into his life, and I don't think he
Speaker 1: wants to look at He's obviously benefited greatly from this
Speaker 1: personally and for the sake of his family. I know
Speaker 1: he's probably um elated, mixed with emotions just like me.
Speaker 1: But but in August July, in the summer of you know,
Speaker 1: I discovered his uh YouTube channel, and you know, YouTube
Speaker 1: has a chat function. So whereas in the past I
Speaker 1: had maybe been you know, saying what I thought on
Speaker 1: a stock Twits platform and it's a you know, one
Speaker 1: comment and then other people have to sub comment on it,
Speaker 1: so to speak, it was very easy for a lot
Speaker 1: of people to just talk about what's going on, what
Speaker 1: are we seeing. As new information came into the mix,
Speaker 1: as Ryan Cohen filed each incremental thirteen d d A,
Speaker 1: as you know, new investors like Senvest added positions, as
Speaker 1: information about their their online sales came into play, and
Speaker 1: we were able to have just open There's nothing collusive
Speaker 1: about what our conversations where we were simply talking about
Speaker 1: what we were seeing, and you know, it was helping
Speaker 1: us to feel the conviction that yeah, we were up big.
Speaker 1: We you know, the price had appreciated already when we
Speaker 1: think about from August into November, it had gotten up
Speaker 1: five x. But we were all looking forward, we were
Speaker 1: all seeing, you know what, there is a huge upside
Speaker 1: opportunity by what I would deem to be two different
Speaker 1: separate options that were embedded in the equity. You had
Speaker 1: the Ryan Cohen option, which to me has now been realized. Um,
Speaker 1: at least it was a big factor. The Ryan Cohen
Speaker 1: option to me was a further acceleration of the company
Speaker 1: into the e commerce digital first space, which is largely
Speaker 1: in line with what Sherman, the curren CEO and management
Speaker 1: team had been articulating. But you know, you had a
Speaker 1: proven winner in e commerce who can go up against
Speaker 1: the biggest, the big who can execute a customer fanatical
Speaker 1: operation and win an e commerce So that was one thing.
Speaker 1: If he were not in the mix, this would not
Speaker 1: be where it is today. The second option is simply
Speaker 1: the short interest I mean, no one, no one can
Speaker 1: call a short squeeze. If you look at my Twitter.
Speaker 1: I've been citing data around it about what is you know,
Speaker 1: Finnries's short interests that they've put out, Um, you know
Speaker 1: Bi Monthly what you know his evor at Street Partner
Speaker 1: has been saying about it. He's put out some great research,
Speaker 1: He's been all over it this week in the past.
Speaker 1: But to me, it was an embedded option that maybe
Speaker 1: this pays off, but what is the value of the
Speaker 1: prospect of there being a fundamental disconnect in the market
Speaker 1: where there is a squeeze action and I think those
Speaker 1: two things made it easier for those of us who
Speaker 1: saw the full big picture to have conviction to diamond
Speaker 1: hand in the parlance of Wall Street bets, and and
Speaker 1: to hold through it and not you know, yeah, I
Speaker 1: took off chips and I made mistakes tactically along the way,
Speaker 1: but I am, you know, very fortuitous, and many others
Speaker 1: are too because they I think I saw things that
Speaker 1: you couldn't see just looking at a spreadsheet. Can I
Speaker 1: ask a really simple business model question? You know the reason?
Speaker 1: And you mentioned that the Shorts never updated their thesis,
Speaker 1: which I think is really interesting, But why isn't physical
Speaker 1: retailing of video games inherently dead or going the way
Speaker 1: of Blockbuster? Because I think that's still probably the missing thing.
Speaker 1: It's like, why does this business exist? What is the
Speaker 1: nature of it that people keep getting wrong about that? Joe,
Speaker 1: that is a great question, and that is the question
Speaker 1: that I think is fundamentally disagreed on by the Longs
Speaker 1: and Shorts in the stock. But if you would ask
Speaker 1: along like me, I would say, we've seen it with
Speaker 1: electric vehicles. Right when adoption curves come into play, people
Speaker 1: think that the next big thing in this case let's
Speaker 1: relate evies to digital downloads of video games, maybe a
Speaker 1: little simple adoption. Curves are not an overnight thing, right,
Speaker 1: It's not a light switch. Um, certain products and services
Speaker 1: are faster than others, of course, but I viewed it
Speaker 1: as given the fundamental landscape we have, what are the
Speaker 1: different demand drivers for a physical video game product. Well,
Speaker 1: game Stop is I believe the most seasonal company in
Speaker 1: the entire market, as it relates to percent of revenue
Speaker 1: being derived from fourth quarter. Holiday gifting is a massive
Speaker 1: driver of game Stops business. And it's not just the
Speaker 1: physical video games that are or digital video game codes
Speaker 1: that are sold, but all the related goods they're sold,
Speaker 1: you know as gift, holiday gifting. So gifting collectibility, I
Speaker 1: think it's a big piece of it. I don't I'm
Speaker 1: a gamer personally, I have downloaded a couple of games.
Speaker 1: I personally prefer to have the collection and be able
Speaker 1: to see my collection. I think a lot of people
Speaker 1: feel that way. If you look at video game streamers,
Speaker 1: you'll see a lot of them proudly, you know, portray
Speaker 1: their collection of games, and they're different paraphernalia. I think
Speaker 1: culturally that collectibility is a piece of it, You've got
Speaker 1: the physical the infrastructure piece of it. I mean, not
Speaker 1: everyone has access to high speed internet. And while a
Speaker 1: lot of games now are released with you know, a
Speaker 1: day one patch that requires you know, however, many gigabytes
Speaker 1: of a download. Um. I think that there's a lot
Speaker 1: of interesting things going on with this current generation. For example,
Speaker 1: backwards compatibility. You can play PlayStation four discs on your
Speaker 1: PlayStation five discs. And when you think about the value
Speaker 1: that a consumer, especially think lower middle income consumers who
Speaker 1: you know they're not they don't have access to the
Speaker 1: best data plan, they may not have the discretionary income
Speaker 1: to pay sixty dollars for a brand new game, and
Speaker 1: they can pay ten, twenty, whatever it might be, they're
Speaker 1: gonna get dozens of hours of entertainment value. Commingle that
Speaker 1: with COVID and I know I'm getting a little away
Speaker 1: from the physical verse digital there, but it's a great
Speaker 1: stay at home entertainment option. And I think a lot
Speaker 1: of people when they become gamers, they stay gamers for life.
Speaker 1: So it's a growth industry macro coming pulling myself back
Speaker 1: to the physical verse digital, I think there's collectibility, there
Speaker 1: is that whole gifting piece, and there's purely the ownership piece,
Speaker 1: like some people just like to physically own something in
Speaker 1: their hand, and even though maybe they couldn't even access
Speaker 1: the game if the server went down, So it's not
Speaker 1: quite different from owning a digital copy of it. There's that,
Speaker 1: and and then the resaleability, of course, which really dovetails
Speaker 1: with game Stop, the fact that you have a residual
Speaker 1: on this product you purchased, and you bought this new
Speaker 1: video game Call of Duty for sixty bucks. You decided
Speaker 1: I don't want to play Call of Duty anymore, and
Speaker 1: I can go and eat. I can sell it on
Speaker 1: an eBay, Marcari wherever, you know, give it to a friend,
Speaker 1: let them borrow it, or I can turn around and
Speaker 1: trade it in a game stop. And if I'm a
Speaker 1: pro member, I'm going to get more credit for it.
Speaker 1: And it is a compelling value, I think. So when
Speaker 1: you started looking into this and you started developing your
Speaker 1: long thesis, what was your actual price target on the stock,
Speaker 1: Like how far did you think it could go? So, Tracy,
Speaker 1: that's a great question. Look, there's a fundamental price target.
Speaker 1: And then clearly where we are today, you know, we're
Speaker 1: on a moon mission. It seems if if you believe
Speaker 1: the Wall Street bet crowd, but fun ndamentally, you know
Speaker 1: the research we put out a gm e DD dot com.
Speaker 1: We we purposefully put that out because after the appointment
Speaker 1: of Ryan to the board, we felt like there was
Speaker 1: going to be an incremental pr campaign on behalf of
Speaker 1: the short side, and and there was sitch r Own
Speaker 1: research came out and I think we need to talk
Speaker 1: about that, but let me not get there right now.
Speaker 1: But we wanted to put out what we believed. Again,
Speaker 1: this is I'm disclaiming any beneficial ownership. I have a
Speaker 1: few hundred shares left at this point. I'm a small fry.
Speaker 1: I'm a kid from Long Island who's gotten wound up
Speaker 1: in some crazy story here that that's going to get
Speaker 1: written about for years, it seems. But you've got a
Speaker 1: fundamental price that Ryan Cohen, like I mentioned earlier, as
Speaker 1: an upside option, we laid out a clear path to
Speaker 1: one sixty nine is a bolcase price target. You know,
Speaker 1: half in jest but half in look. We just wanted
Speaker 1: to point out and this was when the price was
Speaker 1: thirty dollars to share that Ryan brings to the table
Speaker 1: a lot of opportunity. You know, there's a digital advertising
Speaker 1: business that I have done so much research, and so
Speaker 1: many other people have to, but I caught onto them
Speaker 1: testing digital advertising and embedding ads through a third party
Speaker 1: marketing platform on their web properties before anyone else. I
Speaker 1: have been ingesting information that I realized that their online
Speaker 1: ordering platform processes order numbers sequentially. So when I made
Speaker 1: that realization purely as a function of me being a consumer,
Speaker 1: me placing a handful of orders over the summer during
Speaker 1: COVID for video game products, noting, Wow, these numbers look
Speaker 1: like they're going up in you know, in sequence, and
Speaker 1: I realized you can actually back into their e commerce
Speaker 1: for their U S web property order flow with these
Speaker 1: order numbers. I started crowdsourcing that stuff. And I built
Speaker 1: a financial model purely backing out US e commerce based
Speaker 1: on estimates for the size of international based on the
Speaker 1: mix of e commerce to total sales, to to derive
Speaker 1: what is actually going on. I'm doing the dirty work
Speaker 1: that I don't think people like the you know shorts
Speaker 1: were doing. And I had a conversation, you know, I
Speaker 1: had a Hedge fund reach out to me to ask
Speaker 1: me about what I was doing, and they were largely
Speaker 1: in line, and it was like, you know, this is
Speaker 1: a pat on the back, This is the affirmation that
Speaker 1: what you're doing is right and you're seeing things people
Speaker 1: aren't seeing. So all of those things plus just the
Speaker 1: cost function. You know, I talked about the store foot
Speaker 1: print earlier. They had over I think seven thousand stores.
Speaker 1: At one point they're down to fifth five thousand or
Speaker 1: so International included their thirty three domestically. You know, I
Speaker 1: keep seeing people in mainstream media reporting that they are
Speaker 1: a mall based retailer, and yet they are Strip mall domestically.
Speaker 1: So you know, how much due diligence are people doing
Speaker 1: If they're making these assertions purely based on what is
Speaker 1: you know, common knowledge, they're not actually digging into it.
Speaker 1: I will, you know, I eventually want to like get
Speaker 1: over to some of the more current dynamics, the social media, etcetera.
Speaker 1: But I'm actually just like incredibly fascinated by the whole
Speaker 1: fundamental angle. But first for listeners whom may not know,
Speaker 1: and I say listeners, but that includes myself. Can you
Speaker 1: talk a little bit more about Ryan Cohen, his background
Speaker 1: and why his entry into the arena was for so
Speaker 1: many people such a game changer. Yeah, Joe, That's that's
Speaker 1: a huge question that I don't see enough people asking,
Speaker 1: so I want to give it a hopefully ah adequate answer.
Speaker 1: You know, Ryan Cohen, for those who are listening to
Speaker 1: the pod and don't know, he was one of the
Speaker 1: co founders of chewy dot com. What is chewy dot com?
Speaker 1: Hopefully you know folks are aware their pet supply services
Speaker 1: product provider an e commerce native. They basically went into
Speaker 1: a market that you know, Amazon, pet Co, pet Smart,
Speaker 1: all the other big players are already present in, right,
Speaker 1: I mean, you have to start up trying to enter
Speaker 1: an existing market. What did they have? Um? Ryan, from
Speaker 1: all the reading I've done, is a maniacally focused on
Speaker 1: the customer experience. He's just completely obsessed with delivering for customers.
Speaker 1: I think if that Jeff Bezos kind of mantra of
Speaker 1: if you are obsessing about your customers and delivering compelling
Speaker 1: value for your customers, then you know, look, Jeff was
Speaker 1: selling books, Ryan was selling dog food. But you can
Speaker 1: apply that to anything. And I think that we the
Speaker 1: folks who were long Game Stop, saw Ryan enter Game
Speaker 1: Stop and think, well, it doesn't matter that he was
Speaker 1: successful in growing Chewy from a startup to selling at
Speaker 1: three point three billion. Now the company's worth I think
Speaker 1: more than ten x that there's some personal back story
Speaker 1: I've read about Ryan with regards to the passing of
Speaker 1: his father, the timing related to his decisions to make
Speaker 1: the sale of Chewy. Uh. My belief personally is that
Speaker 1: he desires a return to leading, whether it's a legacy
Speaker 1: company or startup, And clearly he's chosen game Stop, one
Speaker 1: would think. And he clearly has a plan for game Stop.
Speaker 1: You know, he laid out a plan in his November letter.
Speaker 1: But even before that November letter to the board, I
Speaker 1: think you saw some smatterings of an activist campaign that
Speaker 1: was put out in Bloomberg and that was put out
Speaker 1: in on a CNBC right up by another UM shareholder
Speaker 1: activism related players. So it seemed like, if you were
Speaker 1: looking closely, you had a guy who had succeeded in
Speaker 1: e commerce, the company was already trying to shift towards
Speaker 1: e commerce, and it just seemed to me like and
Speaker 1: to others that if you combine the two, there's a
Speaker 1: lot of synergy there and the math can make a
Speaker 1: lot more sense for game Stop going forward to be
Speaker 1: you know, compelling value driver for consumers in a more
Speaker 1: digital world, and it can make sense for investors too.
Speaker 1: So I want to get back to the social media
Speaker 1: question and how all this went down on Wall Street Bets.
Speaker 1: And I I take the point about the business model,
Speaker 1: but I kind of feel like you could. You know,
Speaker 1: you can have contrarian bets on a bunch of things,
Speaker 1: and people can make a very convincing case for a
Speaker 1: lot of different companies, but it's it's rare that it
Speaker 1: takes off in the way that it has for gamestock.
Speaker 1: So I really I want to dig into what happened
Speaker 1: on Wall Street Bets and how did this become such
Speaker 1: a big thing. So there's if we are going to
Speaker 1: highlight one point, and I think this is absolutely the
Speaker 1: most important point, is what cit your own research did.
Speaker 1: So first off, let me let me confess I have
Speaker 1: gone on Wall Street Bets. I've perused the platform. I
Speaker 1: find it amusing, informative, entertaining, all of the above. Um
Speaker 1: a little bit I feel a little bit unclean when
Speaker 1: I walk away, but I typically walk away laughing. You know. There,
Speaker 1: I think is this feeling of us versus that boneness
Speaker 1: on Wall Street bets that's really come to the surface. Now. Um,
Speaker 1: you know, we are these small, uninformed something. Some of
Speaker 1: the people on that platform are really smart. We've got doctors,
Speaker 1: lawyers lurking on that platform. You know. I'm sure fund
Speaker 1: managers are lurking on that platform too, but the common yeah,
Speaker 1: super impressive. Let me say why I think SIT's on
Speaker 1: so important because this whole spirst them nous um. Citron
Speaker 1: came out and said we're going to publish a research
Speaker 1: report about why games stuff should be going to twenty dollars.
Speaker 1: And this was when it had surged up to about
Speaker 1: forty or so. I think when people on Wall Street
Speaker 1: that saw that happen, you know, even though the stock
Speaker 1: had already made a very significant run, it just felt
Speaker 1: like another one of those the big guy is trying
Speaker 1: to screw me type moments, and you know, it sent
Speaker 1: the price down temporarily. I tweeted about it, and I
Speaker 1: called it a strategic blunder. If if I have no evidence,
Speaker 1: but if we were to believe that some of the
Speaker 1: big short hedge funds contacted Citron, which again speculating that
Speaker 1: that was a strategic blunder on their part to to
Speaker 1: put out a message from a party that is despised
Speaker 1: on the Wall Street Bets platform and knowing the amount
Speaker 1: of energy. You know, I had a New York Times
Speaker 1: reporter reaching out to me and he had made the
Speaker 1: claim and I haven't validated it that the volume on
Speaker 1: Wall Street Bets went up like ten x after the
Speaker 1: Citrone event so related to game stop. So I think
Speaker 1: that that is clearly the salient moment where everyone kind
Speaker 1: of said, you know, if it this is us first
Speaker 1: them yolo, you know, Diamond hand this thing to the
Speaker 1: moon type of a thing. And people were already saying that,
Speaker 1: but that was the really salient moment. And Tracy to
Speaker 1: your point about some of the really complex maybe options stuff. Look,
Speaker 1: I don't I'm not a Gamma Squeeze UM ficionado. I
Speaker 1: don't know anything about that in details, so I don't
Speaker 1: feel so comfortable try and delve into the mechanics of
Speaker 1: it personally. You guys can explain it to me or
Speaker 1: to the audience, but uh, you know the fact now
Speaker 1: this week that we're seeing UM options market makers refusing
Speaker 1: to write new contracts. And I saw that Robin Hood,
Speaker 1: who if I am correct, routes their order flow through
Speaker 1: citadel who just be ail to outmail them. Capital on
Speaker 1: Monday is no longer even allowing people to open long
Speaker 1: stock positions and game stop only allowing clothes outs. You
Speaker 1: know it sure seems collusive to me on the other
Speaker 1: side of the trade. What's going on, Tracy? Uh? You know,
Speaker 1: why don't you give us our your thirty second description
Speaker 1: of what just for listeners of what the gamma squeeze? Sure? Um, so,
Speaker 1: I guess I should start out by saying that we
Speaker 1: are going to try to record a new episode on
Speaker 1: this topic with someone who's been on before. That's been
Speaker 1: effort from QVR Advisors. He's going to walk us through
Speaker 1: it again, but in a nutshell. Basically, when retail traders
Speaker 1: trade options, there's a market maker who makes that trade
Speaker 1: actually happen. But the market maker isn't trying to take
Speaker 1: a position on the stock. They're not trying to bet
Speaker 1: against it. They want to stay neutral. So what they
Speaker 1: do in order to stay neutral is they typically end
Speaker 1: up buying the underlying stock as the price rises. So
Speaker 1: the idea here is that if the price rises and
Speaker 1: they might get closer to having to pay out on
Speaker 1: the options contract, well they can sell the stock and
Speaker 1: they can make up the difference that way. So what
Speaker 1: tends to happen is as we've seen more retail investors
Speaker 1: get into stock options courtesy of these no commission platforms
Speaker 1: like robin Hood, we've seen this dynamic, it's called a
Speaker 1: Gama squeeze happen a lot more where a lot of
Speaker 1: retail options activity is forcing the share price of the
Speaker 1: underlying stock to actually go up, and that kind of
Speaker 1: leads to a self reinforcing cycle where the share price
Speaker 1: can just go up and up and up and up
Speaker 1: and it. You know, if you have a Gama squeeze
Speaker 1: going alongside a short squeeze at the same time, well
Speaker 1: you really can get to the moon. I guess yeah.
Speaker 1: That was great. This is why I like being your
Speaker 1: co host, Tracy, because we needed that. Rod rod Um,
Speaker 1: I know you're like sitting aside the options mechanics, which
Speaker 1: Tracy I've been explained very well there. What's your view
Speaker 1: of that dimension of investing because okay, we talked about
Speaker 1: the Wall Street beds angle, but the the use of
Speaker 1: these new free tools, the ability for people to trade
Speaker 1: on margin, to trade leverage, to buy options on their phone,
Speaker 1: to sign up an account, in five minutes. What's your
Speaker 1: sense of how important that dynamic is to this particular
Speaker 1: trade in this particular Yeah, this particular mission to the moon. Yeah.
Speaker 1: I had a friend yesterday telling me that his um,
Speaker 1: his girlfriend, had never traded a security before until game stopped.
Speaker 1: She had put twenty five dollars in and it turned
Speaker 1: into a thousand. So I think there's a great example
Speaker 1: right there. You know, I've seen I've had dozens of
Speaker 1: people reach out to me personally and and most of
Speaker 1: whom are small players, but you know, thanking me and
Speaker 1: others for the work we've done over the years. And
Speaker 1: it's it's been incredible. I mean, it's it's been an
Speaker 1: emotional roller coaster, financial road coaster, but but it's truly democratized, Joe,
Speaker 1: to your point, the ability for players to participate in something.
Speaker 1: And look, it is a speculative position right now, it
Speaker 1: is people buying it right now are not buying it
Speaker 1: because the discounted future cash flows are gonna be commensurate
Speaker 1: with a thirty forty whatever billion market cap are currently
Speaker 1: at today, you know, given all known information. But but
Speaker 1: that said, people know that there is a massive short position. Still,
Speaker 1: I think the s three update was much lower than
Speaker 1: it was yesterday, but there's still a massive short position.
Speaker 1: So I think you could argue these people are purely
Speaker 1: irrational and they're gambling, and yes, there are aspects of that,
Speaker 1: and I would say COVID exacerbated because people have a
Speaker 1: lot of discretionary income, some people, you know, we talked
Speaker 1: about the k shape recovery. You guys have covered at length,
Speaker 1: and the beneficiary is having all this excess discretionary incomes
Speaker 1: who have may been able to tap into the financial
Speaker 1: markets in a way that they weren't able to do previously.
Speaker 1: They have some extra time if maybe they're working from home, whatever.
Speaker 1: And look, yes it's risky because a lot of people are,
Speaker 1: like you said, there's margin, there's over leveraging themselves. Well,
Speaker 1: you know the big hedge funds over leveraging themselves, but
Speaker 1: let me stick with the small guys for now. The
Speaker 1: fact that these people are buying long calls and they're
Speaker 1: zero days to expery like last Friday was mind blowing.
Speaker 1: I I had written some sixty calls, so I law
Speaker 1: eight hundred of my shares last Friday. But you know what,
Speaker 1: I wasn't that mad about it because I knew that,
Speaker 1: you know, some read it or along the way probably
Speaker 1: just made life changing amount of money. But it is
Speaker 1: I don't think it's a bad thing necessarily, because look,
Speaker 1: if all market participants are aware of all the market mechanics,
Speaker 1: then people presumably should be able to hedge appropriately. People
Speaker 1: should be able to make strategic bets and or tactical
Speaker 1: bets to to move appropriately big, big and small players.
Speaker 1: But but yeah, there's the definitely the casino effect that
Speaker 1: COVID has exacerbated, and that this democratization of you know,
Speaker 1: zero commission options trading um has foster. Yeah, there's a
Speaker 1: dormant at a hotel in New York that I'm friendly with,
Speaker 1: and he DM me this week asking what options are
Speaker 1: and should he be trading them? What'd you say? Yeah,
Speaker 1: I don't want to get into it too much, I said.
Speaker 1: I think I said, if you don't know what they are,
Speaker 1: it's probably not a good idea to start trading them,
Speaker 1: especially this week. But it's sort of your classic shoeshine
Speaker 1: boy example, isn't it. It's weird that people are talking
Speaker 1: about options so much. People are googling terms like short
Speaker 1: squeeze and even Gama squeezed so much that you can
Speaker 1: actually see the pickup on Google trends. What do you
Speaker 1: think the company should do? In theory, it could do
Speaker 1: something with this money, but I guess it's hands are
Speaker 1: also maybe a little tied because of all the craziness
Speaker 1: that led to it getting that money or the share
Speaker 1: price going up so much. Yeah, Tracy, you're right, they
Speaker 1: doing nothing to me is not an option. And I
Speaker 1: do think there's a little bit of a feeling as
Speaker 1: an investor of a sleep at the wheel, And that's
Speaker 1: just my perception. I haven't had a conversation with investor
Speaker 1: relations in the last couple of weeks. I did reach
Speaker 1: out to them after the cod announcement and ask Eric
Speaker 1: Sarney at Game Stuff, I are, hey, are we gonna
Speaker 1: expect to hear from you guys before fourth quarter earnings?
Speaker 1: And you know that it was you know, one of
Speaker 1: those well for now, that's when you can expect to
Speaker 1: hear most type responses. But you're right, it's the stocks
Speaker 1: that they have a hundred million dollar at the money
Speaker 1: shelf currently that they had um brought out in the
Speaker 1: third quarter earnings release. Losing track of time in my mind,
Speaker 1: but a month or so back, and I'm you know,
Speaker 1: Jim Kramer, I think it was last weekend when the
Speaker 1: price was in like the thirties, was pounding the desk
Speaker 1: saying that that he called up management and was telling
Speaker 1: them they need to issue stock. Well, it's up ten
Speaker 1: x from there, so clearly they they must know something
Speaker 1: or or maybe they're you know, maybe they're better traders
Speaker 1: than you. I don't know, man, but I do think
Speaker 1: it is an opportunity to recapitalize. And you know, as
Speaker 1: an investor, no one likes dilution. But look at what
Speaker 1: Tesla has done over the years. I think that if
Speaker 1: you lay out a path forward, if you lay a
Speaker 1: credible plan to deploy that capital in a productive way
Speaker 1: for shareholders, you know, look, could have become some sort
Speaker 1: of self reinforcing cycle that the price keeps going up.
Speaker 1: I don't know, Well, do they need cash? I've seen
Speaker 1: I've seen because I've seen this discussion on Twitter about
Speaker 1: the idea of raising more than I've seen other people
Speaker 1: say No, they're like they're on track to be cash
Speaker 1: flow positive, etcetera. Like what is the business right now
Speaker 1: in terms of its sustainability stock aside? Yeah, look, they're
Speaker 1: going to degenerate cash this quarter. They have a bond
Speaker 1: maturing that they prepaid of sixty odd percent of that
Speaker 1: matures in March, so they have another bond and then
Speaker 1: a lot of people look at their balance sheet and
Speaker 1: see these least obligations, which will those go away if
Speaker 1: if they close the store. So there's a lot of
Speaker 1: misinformation or lack of understanding around what is truly debt
Speaker 1: versus you know, what's a liability from just an accounting perspective.
Speaker 1: So they don't really have a ton of long term
Speaker 1: debt on their books, and they're in a position to
Speaker 1: even take this crazy price action aside. They were in
Speaker 1: a position to um pay down the March bond with
Speaker 1: you know, no need to tap capital markets. So you
Speaker 1: could argue, look at the interest rates they were paying
Speaker 1: on the debt, they're still junk rated. So is there
Speaker 1: an opportunity for them to improve their credit worthiness by
Speaker 1: raising some capital. You know, that's beyond my personal domain
Speaker 1: of expertise, but I think it is an opportunity to
Speaker 1: better position themselves. And you know, look, if they're trying
Speaker 1: to shift to e commerce, they're gonna need to make
Speaker 1: some investments. I have to think and whether it's the
Speaker 1: digital channel, um, the web properties, whether they want to
Speaker 1: make some incremental fulfillment investments. I don't know what the
Speaker 1: right answer is off the top of my head, but
Speaker 1: I have to imagine that there is opportunity for them
Speaker 1: to invest in that this is a way for them
Speaker 1: to tap a market in a in a much cheaper
Speaker 1: way than what have been a few months ago from
Speaker 1: a delution perspective. So obviously, okay, we get this idea.
Speaker 1: There's the stock itself has become a meme. Everyone's into it.
Speaker 1: Talk to us about the role that the Roaring Kitty
Speaker 1: had in this, and you know, his video is like
Speaker 1: he's very funny. It's also, like you, very smart and
Speaker 1: very like understanding of the fundamental business. And so again
Speaker 1: people might be put off by like or find his
Speaker 1: name funny on Wall Street bets or the videos of
Speaker 1: him dipping chicken tenders, but he's really knows his stuff.
Speaker 1: And so talk to us about like the sort of
Speaker 1: the new the new style guru who like really gets
Speaker 1: the market but also knows how to connect with people,
Speaker 1: and the importance of him specifically in your view of
Speaker 1: catalyzing this action. It's it's difficult to say, but but
Speaker 1: what you you said, Joe, I think has a lot
Speaker 1: of legs to it. This idea that you can be smart,
Speaker 1: you can be knowledgeable, you can to be relatable, you
Speaker 1: can be a goofball, you can have a good time
Speaker 1: and be a nice human being. And I would highlight
Speaker 1: that about the guy. He's a decent human being. He's
Speaker 1: a really nice person. If you ever watch his videos.
Speaker 1: I've spent god knows how many hours over the summer
Speaker 1: just being in there listening to the guy go off
Speaker 1: for hours, and it's truly a community type feel for
Speaker 1: those of us. It was a couple of dozen of
Speaker 1: us at first. You know, the thing is unwieldy at
Speaker 1: this point, there's there were thousands of people on his
Speaker 1: last stream. But he revealed at Christmas that he was
Speaker 1: the df V. He was the same person. No one
Speaker 1: knew who df V was until his Christmas reveals, So
Speaker 1: none of us realized when we were talking to Rar
Speaker 1: and Kitty that he was the same person. So so
Speaker 1: I think that's really important to highlight. It's not like
Speaker 1: we knew realized guy. Yeah, that Joe, that's huge. None
Speaker 1: of us and I've asked everyone, right, and you would think,
Speaker 1: of all the players, I'd probably be the one that
Speaker 1: no no, I had no clue and it was just
Speaker 1: such an overwhelming thing. So just just to clear, there
Speaker 1: is uh, there's this guy Roaring Kitty on Twitter and
Speaker 1: YouTube makes the videos. There's also this account DFV stands
Speaker 1: for deep Value. We can't say that the you know,
Speaker 1: the middle one, but anyone knows what it is. People
Speaker 1: did not realize that the guy on Wall Street Bets
Speaker 1: with the profane name was also the guy on YouTube
Speaker 1: doing the fun video. Correct, got it? Okay, keep going, Sorry,
Speaker 1: I just wanted to that's I didn't realize that. Yeah,
Speaker 1: I know a big part of the story, I think. Um,
Speaker 1: so you know, going back to like how impactful was he?
Speaker 1: You know, we need to understanding that little nugget right there.
Speaker 1: Think about what was it that you know, gave anybody
Speaker 1: reason to follow him. You know, the guy made this
Speaker 1: big trade in like I alluded to earlier twenty nineteen August,
Speaker 1: completely independent of me. I never knew him until this
Speaker 1: past summer. But like Dr Burry, we saw what we
Speaker 1: believed to be a very mispriced security and we thought
Speaker 1: that the timing made sense in terms of the catalysts
Speaker 1: that we would see along the way. Like I said earlier,
Speaker 1: no way to know what would happen with COVID and
Speaker 1: Ryan Cohen. But he made a very highly convicted, highly
Speaker 1: you could call it speculative, but it was reasoned bet
Speaker 1: on a lot of out of the money call options.
Speaker 1: He accumulated several thousand January one, it was like seven, ten, twelve, fifteen,
Speaker 1: maybe seventeen and twenty dollar strikes, so he had put
Speaker 1: I believe a hundred odd thousand dollars of you know,
Speaker 1: he he noted um in his coming out video that
Speaker 1: his family, you know that they rent at their house.
Speaker 1: They don't come from wealth. You know, he his wife's daughter.
Speaker 1: They are not financially well to do so. Truly, it
Speaker 1: was the embodiment of a Wall Street Petiolo play for him,
Speaker 1: and he's been public about that now that he's kind
Speaker 1: of come out on it, and I think people that
Speaker 1: gives people something to coalesce around the guys for months,
Speaker 1: for years, posted and on Reddit as df V, he
Speaker 1: would purely post a screenshot of his position, and like me,
Speaker 1: he was down huge at certain points. Stock got down
Speaker 1: to two p seven intra day it closed at two eighty,
Speaker 1: and it didn't cause us to be rattled in our
Speaker 1: thesis necessarily. I mean, sure it hurt looking at our
Speaker 1: positions in the valuation, but it's kind of like this
Speaker 1: guy has the you know, the balls to see a
Speaker 1: trade through, to have conviction, and I think that won
Speaker 1: him a lot of admirers. And that's why I believe
Speaker 1: a lot of the redditors are are so enamored with him,
Speaker 1: and he's kind of like a deity to some of them.
Speaker 1: But but they don't many of them don't understand the
Speaker 1: full story. And I think that it's important to realize
Speaker 1: this was a guy who came in. He made a
Speaker 1: yolo type play in terms of the percent of his
Speaker 1: portfolio who allocated. Personally. For me, it was similar. It
Speaker 1: was a majority of my portfolio. Not something I recommend
Speaker 1: anyone ever do, but I was that convicted in the
Speaker 1: play that I did similar to him, UM haven't had
Speaker 1: the same outsize games because my options were not so
Speaker 1: deep out of the money, but it was reasoned. It
Speaker 1: was conviction, just like the shorts conviction. They were fully
Speaker 1: convicted in bankruptcy. They clearly had to believe that the
Speaker 1: outcome was bank receiving the stock traded below three or
Speaker 1: four dollars. When it traded below net cash, it didn't
Speaker 1: strike me that the risk reward made sense to be
Speaker 1: short at that point. But you know, who knows who
Speaker 1: was driving on that side. Um. But for Roaring Kitty,
Speaker 1: you know, just his consistency of delivering his position updates
Speaker 1: on Reddit, his alter ego roaring Kitty, excuse me on YouTube,
Speaker 1: being just He'll greet everybody who enters the chat, asked
Speaker 1: how they're doing, genuinely engaging conversation, just a nice human being,
Speaker 1: and I think everyone that authenticity truly, you know, spoke
Speaker 1: to everybody who was involved, and that's why you know
Speaker 1: people are rooting for the guy. You've done a lot
Speaker 1: of analysis on the fundamental business model of game Stop.
Speaker 1: We're talking a lot about all this market craziness, but
Speaker 1: ultimately game stop share price is up. Um. I'm looking
Speaker 1: at it right now. It was recently halted, but I
Speaker 1: think we were over four hundred dollars per share, so
Speaker 1: an astronomical jump. I mean, there's been three halts. I've
Speaker 1: been trying to follow it a little bit while we've
Speaker 1: been discussing this morning. You know, we started around nine thirty,
Speaker 1: and they're at least three halts from what I've seen,
Speaker 1: I see the highs at four eight three? Can it
Speaker 1: go much higher? Could have double? Could have triple? It could?
Speaker 1: I don't know, but I just sold four shares at
Speaker 1: fit full disclosure. Um, I've I've memified myself for all
Speaker 1: of eternity, and I'm happy to be recorded saying as such,
Speaker 1: because look, it's fun. That's the thing I think people
Speaker 1: are missing. It is speculative. People are gambling right now.
Speaker 1: If you're buying Game Stop at this price point, you
Speaker 1: are buying because you believe it will keep going up,
Speaker 1: just like you would assume any investor in any security
Speaker 1: is doing. Um, there's different theses underpinning their reasons for
Speaker 1: thinking the price will go up, But for now, they
Speaker 1: may have a belief that there will continue to be
Speaker 1: for some time more buyers than sellers, and as these
Speaker 1: you know, major headge funds continue to liquidate, that there
Speaker 1: may be more forced buying. I don't know what everyone's
Speaker 1: personal strategy is. I don't know how high it could
Speaker 1: possibly go. It you know, hearing about these halts and
Speaker 1: all these kind of shady things where you have the
Speaker 1: brokerage is not even allowing people to enter alongsides of
Speaker 1: the trade. I mean, I I think it's unleashing a
Speaker 1: fervor uh child. I really put it well on CNBC.
Speaker 1: It really feels like, you know, if the retail if
Speaker 1: the small guy or girl gets screwed over or loses out,
Speaker 1: you know, their s O L. But if the big
Speaker 1: fund makes a mistake and doesn't manage their risk management
Speaker 1: prudently and now they get trapped on the wrong side
Speaker 1: of a trade, somehow they have the levels of power
Speaker 1: that they can escape. And I think people are are
Speaker 1: trading emotionally, and I can appreciate that. Last night when
Speaker 1: I saw Wall Street bets go private and I saw
Speaker 1: people discussing it, I saw I thinks in Thomas Paine
Speaker 1: on a Fox Business a recording of The Gentleman, you know,
Speaker 1: kind of pounding the table saying, you know, buy gamest
Speaker 1: of like people aren't doing a discounted cash flow analysis
Speaker 1: to buy games up at these levels and no one
Speaker 1: is going to claim otherwise. But just like with Tesla,
Speaker 1: I think that there's that piece of you know, investors,
Speaker 1: if they just want to see the company succeed, what
Speaker 1: how do you value that in your equation, GameStop is
Speaker 1: a venerable brand. This is something I think people miss um.
Speaker 1: I saw some market research a few months back. One
Speaker 1: of my consorts in our group is a marketing UH
Speaker 1: leader and you know, like many, he's opted to remain anonymous,
Speaker 1: but he had shared some researchers showed game Stop was
Speaker 1: behind Walmart, Amazon Dollar Stores and it was either fourth
Speaker 1: or fifth on the list of holiday gifting destinations. And
Speaker 1: this was across a broad sway that the population. This
Speaker 1: was young folks all the way up to you know,
Speaker 1: boomer plus. And if people have that brand presence, that
Speaker 1: brand awareness, twenty plus million active Power Rewards members in
Speaker 1: the last year, you have a brand that exists. You have, yes,
Speaker 1: a legacy physical video gaming product that is in a
Speaker 1: long term decline, but that many would argue is not
Speaker 1: going away um even within the end of the decade.
Speaker 1: In my opinion personally, that can pivot into the other
Speaker 1: areas of a nearly two hundred billion dollar video gaming
Speaker 1: tam Are there adjacencies beyond video gaming that they could
Speaker 1: spread into. I don't know, so I haven't heard anything
Speaker 1: from Ryan since he was added to the board. We
Speaker 1: tried to lay out at bowl case in our g
Speaker 1: M E. D D kind of incorporating what we've seen
Speaker 1: from existing management and from Ryan, and I think that
Speaker 1: there is an argument that Ryan could push the price
Speaker 1: beyond where it is today, but there's not enough known
Speaker 1: information to to you know, make an investment based solely
Speaker 1: on that. So right now, yes, Tracy, it's absolutely speculative.
Speaker 1: I don't think it's unreasonable to think game Stop could
Speaker 1: see prices like four hundred dollars in the future if
Speaker 1: Ryan is given you know, full rain, I would stand
Speaker 1: by that comment. But again, I am not encouraging anyone
Speaker 1: to you know, invest for long term value at fifty cents.
Speaker 1: Let me you know, I actually wanted to get into this.
Speaker 1: You mentioned the brand. You also mentioned that you're um
Speaker 1: a gamer personally, and you know my understanding and totally
Speaker 1: correct me if I'm wrong, is that the gamer community
Speaker 1: has long held a sort of love hate relationship with
Speaker 1: the games With games up, could you a sort of
Speaker 1: describe that relationship, but also be I imagine there's a
Speaker 1: massive overlap between the redditors, Wall Street betters and gamers,
Speaker 1: So how does that fit into the excitement for the
Speaker 1: trade that whether it's love or hate. There's probably an
Speaker 1: intimate familiarity with this company for many of the people
Speaker 1: trading the stock. Yeah, Jo, that's a good point. I
Speaker 1: mean I think I said love hate as you were
Speaker 1: saying it's sorry. But I feel the same way, and
Speaker 1: I think a lot of folks. Look, video gaming is
Speaker 1: not um I mean, obviously it's growing like crazy, and
Speaker 1: a lot of people, if you're younger, especially, we talked
Speaker 1: about the democratic democratization of kind of investment with these
Speaker 1: lack of commissions, ease of accessing options, trading and you know,
Speaker 1: not encouraging trading derivative securities you don't fully understand. But
Speaker 1: I think that that is a good point that a
Speaker 1: lot of us grew up with game Stop, a lot
Speaker 1: of us grew up with video games. We saw this company.
Speaker 1: Maybe we're looking now back in hindsight and saying, yeah,
Speaker 1: it was at four bucks, now it's at four but
Speaker 1: like feeling like GameStop had, you know, the man's boot
Speaker 1: on its neck, and this company was trying to be
Speaker 1: dragged down by these big money to parties and interests.
Speaker 1: So you've kind of got that contrarian like rage against
Speaker 1: the machine type feel where people were like, you know,
Speaker 1: it's screw it. I like this company too. Maybe I'll
Speaker 1: have been always happy with how much they wanted to
Speaker 1: give me for my old mad and trade in. But
Speaker 1: I see that they're making progress. I like the things
Speaker 1: that I'm hearing about this new guy being involved. Look,
Speaker 1: they launched a new web app or io iOS and
Speaker 1: android app at the end of September. They've upgraded the
Speaker 1: web property, so I assume there are many new customers, right.
Speaker 1: I said that twenty million active power Up members, and
Speaker 1: last year in the K it was fifteen and change.
Speaker 1: So clearly they've added a lot of new customers or
Speaker 1: new old customers within the last year, especially in mid COVID. Again,
Speaker 1: no one could have planned for that, but I think
Speaker 1: people remember the brand. People have different emotional connections. Video
Speaker 1: gaming is kind of Look, some people have these games
Speaker 1: that they play for years. I got an Xbox Series
Speaker 1: X and I've been playing Skyrim, which is a game
Speaker 1: from like epic game from Bethesda, who Microsoft bought um
Speaker 1: a couple of months back. But if people have a
Speaker 1: very emotional connection with video games, I think they have
Speaker 1: the social connection with video games, where whether it's over
Speaker 1: the Xbox platform or PlayStation. You know, I know Game
Speaker 1: Stop is trying to make themselves the social and cultural
Speaker 1: hub of video gaming. That's part of their reboot strategy.
Speaker 1: So you have all of these, uh you know, aspects
Speaker 1: of it that that make it more than just a
Speaker 1: me sitting at home in isolation playing a video game.
Speaker 1: I think that that cultural, that social piece is part
Speaker 1: of that story that you're talking about with the love
Speaker 1: hate you talking about how old Skyroom is. Um, that's
Speaker 1: made me feel very very old all of a sudden. Um.
Speaker 1: But I wanted to talk about this nostalgia element in
Speaker 1: Game Stop because some of the other meme stocks that
Speaker 1: we've seen go up recently. You know, we have a
Speaker 1: m C which operates movie theaters. We have Tutsie, Role, BlackBerry,
Speaker 1: and a few others, and I think a lot of
Speaker 1: people might associate that with, you know, growing up. Are
Speaker 1: things that have happened in their past. I guess what's
Speaker 1: your advice for seeking the next meme stock that goes up?
Speaker 1: Is it to find something that a lot of people
Speaker 1: identify with where there might be hidden value? Is it too?
Speaker 1: I know you said you weren't big on the gamma
Speaker 1: squeeze theory or dynamics, But is it to identify structural
Speaker 1: weaknesses in the stock, like the amount of short interests
Speaker 1: that's out there. What are you going to be looking for?
Speaker 1: Assuming that you know, maybe you do this again. Let
Speaker 1: me say one thing. I'll never again have a position
Speaker 1: to constitute the majority of my personal portfolio. And I
Speaker 1: hope other people consider more prudent portfolio management than i.
Speaker 1: Um I've been a beneficiary of it in this case.
Speaker 1: But you know, I'm I'm contrarian by nature. I bought
Speaker 1: Game Stop in two seventeen as a deep value play,
Speaker 1: so I'm not going to be chasing the next hot
Speaker 1: big thing personally, And I don't begrudge anyone who follows
Speaker 1: different online message boards or Twitter personalities and decides that
Speaker 1: that's the way that they are going to play the game.
Speaker 1: They're going to see what some big name has to
Speaker 1: say that this is the stock they should buy and
Speaker 1: and follow the crowd. And I'm not a crowd chaser,
Speaker 1: but there's something to be said if the crowd is
Speaker 1: big enough that that crowd can overwhelm even the largest
Speaker 1: of hedge funds. So to identify the next opportunity, you know,
Speaker 1: I'm I think I've made the point I'm looking at
Speaker 1: the financials. I'm trying to look forward. I'm not gonna
Speaker 1: worry about like you know, the game stops. Income statement
Speaker 1: was trash for the last a couple of years, given
Speaker 1: um acid impairments and goodwill write downs. So you need
Speaker 1: to dig into things and understand what's truly happening. Appreciate
Speaker 1: changes at the board end management level, because those are
Speaker 1: you know. Look for my day job, I do corporate strategy.
Speaker 1: I get to interact with c suite and and you
Speaker 1: kind of work on board decks and presentations, and you know,
Speaker 1: if if you have the right people in place all
Speaker 1: across the company, I think amazing things canna happen. So
Speaker 1: it's not a simple answer, but you need to dig
Speaker 1: in and understand what's going on. And until you do. Personally,
Speaker 1: I don't feel comfortable investing unless I really understand what's
Speaker 1: going on. Maybe that's why I'm so heavily in cash
Speaker 1: now that I've sold out of game stuff. Just haven't
Speaker 1: had time to dig into other things. But I think
Speaker 1: that's that's my message is is you've got to do
Speaker 1: the due diligence. You've got to do the work. You
Speaker 1: can't you can I guess follow a Gama squeeze into
Speaker 1: into the moon. But um, I don't think that that's
Speaker 1: a long term successful strategy. How many hedge funds have
Speaker 1: reached out to about joining them? Joining yeah, or having
Speaker 1: you be a trainer portfolio man? I have, you know
Speaker 1: one of the members of our little groups. So I
Speaker 1: don't know, Joe, if you saw it, Tracy, I had
Speaker 1: written Ryan. Um, I wrote to his lawyer, worked with
Speaker 1: a shareholder activism lawyer, and and you know, I penned
Speaker 1: the letter and he cleaned it up a little bit
Speaker 1: on behalf of four percent of shares outstanding. Again, I
Speaker 1: don't I'm not the beneficial owner of that. I don't
Speaker 1: have any control over what they do. I'm sure many
Speaker 1: of them have sold on this wild run. But after
Speaker 1: he put the letter out to the board in November,
Speaker 1: we had this belief that Ryan offers absolutely the most
Speaker 1: upside value for game Stop, and we wanted Ryan to
Speaker 1: be more involved. And Ryan had made it clear I
Speaker 1: think from his third filings that he wanted to be
Speaker 1: more involved. So we we wrote him, you know, a
Speaker 1: love letter. We said, we love what you you said
Speaker 1: in in your letter to the board, we agree, we've
Speaker 1: seen what's happened over the years, you know, with the
Speaker 1: strategic review and the refreshing of the board and with COVID,
Speaker 1: we agree that another strategic review makes sense given how
Speaker 1: fundamentally the business has changed over so we lent our support.
Speaker 1: We noted if there is a proxy event, you know,
Speaker 1: he'd have our our our swords, so to speak. And
Speaker 1: obviously they reached the settlement. So I have no idea
Speaker 1: if if what we advised him had any part in
Speaker 1: the negotiation, and I'd like to think it had a
Speaker 1: small part to play, but that is I think the
Speaker 1: best that are a small retail investor could ever do
Speaker 1: is to say to you know, the other, the largest
Speaker 1: individual investor, you know, look we we see what you're
Speaker 1: doing and saying we agree with what you're doing and
Speaker 1: saying and you know, if there is a fight, look,
Speaker 1: there was a there was a proxy fight last spring,
Speaker 1: and I think a lot of us who have been
Speaker 1: in it for a long time, we're able to take
Speaker 1: our learnings and our experience being involved with the Hasta
Speaker 1: permit proxy fight in Spring to know how to position
Speaker 1: ourselves and perspectively profit off of another upcoming proxy so
Speaker 1: it's not like we, uh, we're just mad men following
Speaker 1: this guy into battle. We we we did our research.
Speaker 1: We wrote him, we said, you know, we're interested in
Speaker 1: the direction you're taking the company. And that's why when
Speaker 1: he joined the board with Alan A. Fall and Jim
Speaker 1: Group from Chewy and we put out this research saying
Speaker 1: why we saw a bowl case that would be you know,
Speaker 1: far higher than what the price was at the time.
Speaker 1: If you're not getting offers from hedge funds, you can
Speaker 1: you can join our spack the odd thoughts back. We're
Speaker 1: gonna buy call options on Meme stocks with big shorts
Speaker 1: on them, big short interest. That's our plan road any
Speaker 1: last quick thoughts things that we missed, don't you want
Speaker 1: to get across? Yeah, I would just say for me personally,
Speaker 1: and I think I speak for many of the folks
Speaker 1: who have been on this crazy ride, and it's been
Speaker 1: a it's an emotional roller coaster. It's been a life
Speaker 1: changing experience. Um, it's been really you know, power focus
Speaker 1: hearing how many people's lives have been changed for the better.
Speaker 1: So I'm just very thankful Rod. That was so great.
Speaker 1: We're so so happy that you came on. I love
Speaker 1: this story. I think it's when people listen to it,
Speaker 1: they'll realize it's much more interesting than they probably realized.
Speaker 1: Very cool. Thank you so much for coming out on
Speaker 1: odd lot. Thanks Rod, Thank you so much, Joe and Tracey.
Speaker 1: It really appreciate did it. Tracy? That is just that
Speaker 1: was the best story. You know, you said, this is
Speaker 1: one of the um this might be the craziest week
Speaker 1: you've ever seen a market. That is hands down one
Speaker 1: of the best market stories ever period. There's a lot
Speaker 1: going on, that's for sure. I mean, I think Rod
Speaker 1: like laid out a very interesting story about how he
Speaker 1: first got involved in the stock I thought this idea
Speaker 1: that you know, he had been to lots of walls
Speaker 1: when he was growing up and was a gamer and
Speaker 1: probably had good memories of Game Stop, or at least
Speaker 1: prominent memories of Game Stop. That's very interesting to me.
Speaker 1: I do think. I do think there's gonna be and
Speaker 1: clearly it worked out for him, right, Like I know,
Speaker 1: he didn't say exactly how much money he made, but
Speaker 1: he is very happy, obviously very emotional towards the end.
Speaker 1: There is this element of the democratization of finance. However,
Speaker 1: I do think we should talk more about the sheer
Speaker 1: sort of gamma short squeeze dynamics. I think we should
Speaker 1: talk maybe to someone who got in the stock just
Speaker 1: based on pure flows and just to jump on the bandwagon.
Speaker 1: We should definitely delve more into what exactly the endgame
Speaker 1: is here, because there might be some people who don't
Speaker 1: have as great an outcome. So I'm happy for Rod,
Speaker 1: I'm still slightly worried about some people who are in
Speaker 1: the trade and you know, if they get caught offside.
Speaker 1: Totally and completely agree on all that, I don't even
Speaker 1: have anything to add. I just really love it. It's
Speaker 1: a great story, and no, I do you know, I
Speaker 1: do think the one thing is is like I love
Speaker 1: that this story actually really did originate with a value
Speaker 1: trade because there's so much talk the death of value,
Speaker 1: the death of value, and this is like it's sort
Speaker 1: of like maybe become the iconic trade of this bull market,
Speaker 1: and it's just such an old school like value thing.
Speaker 1: It's like the I said, you know, you read Roger Report.
Speaker 1: People should go to gim E d D dot com
Speaker 1: to look at the original research. You watch the Roaring
Speaker 1: Kiddies videos and so on. It is like, you know,
Speaker 1: like a like an old Bill Ackman breakup value case
Speaker 1: where it's like really understanding the business, the likes of
Speaker 1: which does not fit the popular narrative of everything just
Speaker 1: being about like sort of growth and you know what's hip.
Speaker 1: It was like they understood the business, they made a
Speaker 1: call on it. They they had a view that the
Speaker 1: underlying business was worth more than the stock and they
Speaker 1: were got. And I'm going to debate you on this
Speaker 1: because I know Rod and Roaring Kitty did have a
Speaker 1: value thesis on this, but like, to me, this is
Speaker 1: a value play or some people had a value play
Speaker 1: and then it turned into something else. I think even
Speaker 1: the goals like can't argue that this level was justified
Speaker 1: and we'll talk more, yes, but I like that it
Speaker 1: started with that. Yeah, But you know what's interesting real
Speaker 1: quickly on that point, it's not like you know, you
Speaker 1: think of a lot of like value trades is like, oh,
Speaker 1: I see twenty five percent upside from here if you
Speaker 1: break it up. They did see the huge multiple in crystal.
Speaker 1: It wasn't just like you know, they did see that
Speaker 1: this good thing could rock it. It was not like
Speaker 1: this will be a marginal winner there beat that was
Speaker 1: going back watched the Rowing Kitty's video from August that
Speaker 1: it would go to the moon, and so like that's true.
Speaker 1: They kind of called it anyway. No, I I agree, Um,
Speaker 1: and it was great having Rot on the show to
Speaker 1: kind of remind everyone of the origins of game Stock.
Speaker 1: But I also think he's right. You know, we're gonna
Speaker 1: be talking about this forever, and uh, you know, there's
Speaker 1: there's there's a chance that he's going to pop up
Speaker 1: in a lot of market history books going forward, all
Speaker 1: along with people like Roaring Kitty and Deep Fudging Value.
Speaker 1: All right, um, shall we leave it there. Let's leave
Speaker 1: it there. This has been another episode of the All
Speaker 1: Thoughts Podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can
Speaker 1: follow me on Twitter at The Stalwart. Follow our guest
Speaker 1: Rod Alsman on Twitter, He's at Rod Alsman, which is
Speaker 1: a l Z M, A N N. Check out his
Speaker 1: website g M E D D dot com. Also follow
Speaker 1: our producer Laura Carlson. She's at Laura M. Carlson. Follow
Speaker 1: the Bloomberg head of podcast, Francesco Leavi at Francesca Today,
Speaker 1: and check out all of our podcasts at Bloomberg under
Speaker 1: the handle at podcasts. Thanks for listening to