It is yesterday once more for GameStop Corp. (GME). The Grapevine, Texas-based company’s shares surged by 24% to $163.50 in pre-market trading after The Wall Street Journal reported on GameStop’s plans to establish partnerships with cryptocurrency companies and build a marketplace for non-fungible tokens (NFTs), which are digital collectibles on a blockchain.
At close of trading on Jan. 6, GameStop stock was changing hands for $131.03. As of this writing, the company’s shares had climbed to $155.95.
- GameStop shares are soaring after a Wall Street Journal report that revealed its plans to get into the market for non-fungible tokens (NFTs).
- GameStop plans to build an NFT marketplace and invest in crypto companies.
- Investor reaction to the news may have been premature, as the NFT market will take many years to mature, according to analysts.
The run-up in GameStop’s shares this morning mirrors its volatile trajectory in 2021, when retail investors pumped up the share price by roughly 687%. The jump occurred even as the company continued to lose market share in its industry and reported increasing losses on its balance sheet. Most traders consider GameStop to be a meme stock because its price gyrations are not dictated by conventional metrics, such as earnings or industry market share.
What Are GameStop’s Crypto Plans?
According to The Wall Street Journal, GameStop is building an “online hub” to buy, sell, and trade NFTs for select game developers and publishers. It is also developing games that use such tokens and is “close to signing” partnership agreements with two cryptocurrency companies. Bloomberg reported that GameStop is also setting up funds, each worth $100 million, to invest in game studios and crypto companies.
Setting up an NFT marketplace and investing in crypto companies is another strategic ploy by the retailer to move away from its brick-and-mortar roots to a digital-first approach championed by its owner, Chewy.com founder Ryan Cohen.
Matt Furlong, GameStop’s chief executive officer, said during its December 2021 earnings call that the company was setting itself up for “long-term positioning” and was exploring emerging opportunities in blockchain, NFTs, and web 3.0 gaming.
An Exploding Market
The market for NFTs exploded in 2021 after the record sale of an NFT painting at auction house Christie’s. According to DappRadar, a store for decentralized applications, trading in NFTs on various online platforms skyrocketed to $22 billion last year from $100 million in 2020. GameStop reported an increase in revenues on the back of sales of hardware and accessories last year.
But investor reaction to the company’s latest NFT move may be exaggerated as the market is yet to mature. “2021 NFT activity was frenzied. That’ll subside in coming years and NFTs will settle into something more akin to today’s modern art market, where consensus on value is more solid,” George Monaghan, analyst at research firm GlobalData told The Guardian last year. He said it’ll be “years” before crypto or NFT markets resemble conventional markets.
For now, the GameStop pop will likely help solidify the company’s reputation among the Reddit crowd. Tokyo-based analyst Serkan Toto told Bloomberg that GameStop has bought some time by “dangling NFTs in front of investors.”
And there’s work to be done. “I am very skeptical if GameStop can make it on its own. The company definitely needs partners to compete with the likes of OpenSea and get video game companies to cooperate,” Toto said. OpenSea is the world’s biggest NFT platform.