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I expect to catch a bit of flack for this one, and I get it, nether the less, here goes I’ve spent a fair bit of time digging into GameStop $GME and the more I look at it, the more I think it deserves a bit more attention. 

Most people still see GameStop as a struggling retailer in a digital world. If that was all it was, i wouldn’t even bother to look at it but actually, today’s GameStop is a very different business to the one people have in their heads. They’ve closed nearly 2 thirds of their unprofitable stores, cut SG&A aggressively, cleaned up the balance sheet and are now sitting on roughly $9 billion in cash, plus about $300m worth of Bitcoin.

I can’t stop thinking that once you consider the company is trading at the value of cash sitting on its balance sheet ($9B cash. $9B MC), it starts to feel like shareholders are getting everything else almost for free.

I am not too interested in what the retail legacy business is doing, it’s boring and never going to set the income statement on fire. It’s the collectibles business that I am focused on. In FY25, GameStop run $1B in collectibles revenue, growing 47% year over year and accounting for almost 30% of total revenues. Trading cards, Pokémon, sports cards, grading, authentication and collectibles are becoming a meaningful part of the GameStop story here. As a collector myself, I think the industry is still operating like it’s 20 years behind where it should be. The PSA partnership, grading services and the potential for blockchain based ownership and authentication could completely modernise the space over the coming decade. And imho GameStop are in the forefront of that race. 

So far we have established that GameStop have closed most of their unprofitable stores, cut expenses, turned $130M in profit last year, and you get all this free as the downside covered by the cash. Then there’s the elephant in the room….

Ryan Cohen and the cash pile. Management has been very clear that mergers and acquisitions are on the table. Whether it’s eBay or something else entirely, GameStop now has the financial firepower to pursue opportunities that simply weren’t possible a few years ago. If Cohen can successfully deploy that capital into high quality assets (which imo he will), the upside from today’s valuation could look very different. I think an eBay combination would be very, very good business. You’d effectively be combining one of the largest collectibles retailers in the United States with one of the largest online collectibles marketplaces in the world,    then incomes PSA integration (possibly on the blockchain at some point) and all of a sudden you have a chunk of market share in a growing multi hundred billion dollar industry.

So if cash covers cost is there no risks attached? Of course not. Future dilution is a matter of when, not if. Acquisitions don’t always work. Management could make poor capital allocation decisions. But when I look at a company with a fortress balance sheet, growing profitability, a rapidly expanding collectibles business, optionality from Bitcoin, and potentially transformative M&A opportunities, I struggle to see the same downside that many bears see.

The speculative thesis for me personally, is the GameStop story today isn’t about selling video games anymore. It’s about what Ryan Cohen decides to build with $9B in cash balanced against a balance sheet that imho offers incredible downside protection here. That is what I call an asymmetrical opportunity. If he gets that right, I think people could look back in a few years and realise they were valuing the cash while completely ignoring the opportunity sitting on top of it.