GameStop is semi-correlated with the esports gambling world already. After all, it’s the largest retailer of video games by far. Esports betting, meanwhile, is all about gambling on video games in some form or another.
Of course, it’s not like GameStop runs an esportsbook or a platform where players can bet against each other. But according to Citron, a premier stock commentary site, GameStop needs to get into the esports gambling realm with a splashy acquisition.
Will GameStop soon enter the esports betting world? You can find out below by reading about how GameStop wound up in this position, the Citron report, and what the company figures to gain from esports gambling.
How Did GameStop Get to This Point?
GameStop (trading under GME) has been in the news a lot lately. It become the subject of a trading war between Reddit’s r/WallStreetBets and high-profile hedge funds.
Founded in Texas in 1984, GameStop has risen to become the premier brick-and-mortar retailer of video games. Of course, many businesses with a heavy physical presence aren’t doing as great these days.
GameStop’s stock has dropped quite a bit in recent years, bottoming out at $5 in 2019. It’s struggles are largely attributed to the digital storefronts that are gaining more and more market share.
In 2019, a WallStreetBets user by the handle ‘delaneydi’ argued that GME’s stock price fell too much, leaving it undervalued. This analysis started a movement to not only capitalize on GameStop’s low price but also punish the short-sellers.
The latter are traders who pay a fee to borrow shares, try selling them at a higher price, then buy the shares again at a lower price.
In this particular case, hedge funds were hoping that GameStop would go bankrupt. They wouldn’t have needed to return the stock at all in this case.
WallStreetBets memed and posted about the GME short-sellers so much that they rallied many people to take positions. Short-sellers collectively lost billions of dollars afterward.
The Wall Street firm Melvin Capital especially took huge losses on their short positions and were eventually bailed out by Citadel Securities.
The popular trading app Robinhood, meanwhile, stepped in and forced some GME holders to sell—a move that relieved some pressure on short-sellers. Robinhood cited too much “volatility” as the reason for forcing the trades.
All of this culminated in a temporary stock price rise for GME, going from $5 per share to $347 on January 27, 2021.
With all of the smoke cleared, though, GME’s price has fallen back to $100. The company is now left in the same declining position, where they need to make a serious move to stay relevant.
Citron States That GameStop Should Be Esports Entertainment Inc
Citron has been analyzing the stock market for nearly 20 decades. During this time, it’s become one of the go-to sources for traders.
Like many analysts lately, Citron took a look at the GME situation. The research firm concludes that, with the stock frenzy mostly over, GameStop must plan its next move to stay relevant.
“There is one way for GME to seamlessly pivot away from its secularly declining retail business and monetize its customer base,” Citron notes, “and that answer is to acquire Esports Entertainment Group (GMBL).”
The firm cites how GameStop has a very valuable asset with its 55 million PowerUp members. Rather than selling these customers “low margin hardware and video games,” they should become a top betting platform so that their customers can complete in and gamble on esports.
Citron also points out how many, like Bill Gates and the Wall Street Journal, likened the GME/WallStreetBets frenzy to gambling.
They believe that this phenomenon is telling is a sign that Americans have embraced real money gambling. Therefore, GameStop needs to give their customers what they want.
What Is Esports Entertainment Inc?
Esports Entertainment is the first esports betting company to gain a NASDAQ listing. CEO Grant Johnson has been in the online gambling industry since the 1990s and has strong knowledge of the industry.
Johnson has guided this company into a position to capitalize on regulated mobile esports betting in the US and beyond.
Assuming GameStop acquired GMBL, then they’d stand to benefit from the following:
- Own the only vertically integrated esports gambling platform that’s listed on the NASDAQ.
- Add an expansive analytics platform.
- Add 2 million gaming customers.
- Add 2 out of the 5 largest US-based esports entertainment centers (via Helix Esports).
- Add LANduel, a proprietary player-vs-player (PvP) betting platform.
How Will Esports Betting Boost GameStop’s Business?
US esports betting doubled to $14 billion in 2020. It’s considered one of the fastest-growing gambling markets and should continue exploding.
Meanwhile, GameStop’s business model, which relies heavily on brick-and-mortar stores, has been on the decline for years. Unlike companies such as Blockbuster and Borders, which failed to update their business models, GME still has time.
It has a $7 billion market cap thanks to the recent stock revival. GMBL currently hovers around a $287 million market cap.
GME is certainly big enough to absorb Esports Entertainment Inc. It could also latch on to a rising company and add brand recognition in the process.
Everybody who’s into esports betting knows the GameStop name. However, they don’t all use GameStop’s services due to the growing prevalence of digital retailers.
GameStop can use its name as a marketing tool while it still has plenty of value. More importantly, it can take advantage of the trending PvP betting to improve revenue.
LANduel could be a huge key to boosting this revenue. It’s an innovator in the PvP betting field, which is still largely untapped so far.
It holds relationships with several top game publishers and is making inroads with the New Jersey Division of Gaming Enforcement. The latter could help LANduel become the first PvP gambling platform to gain licensing with a major regulatory body.
Could GameStop Improve the Esports Gambling World?
Several other companies have already gained a foothold in player-vs-player esports betting, such as Unikrn. As mentioned before, though, this market is still mostly untapped. Much of it operates in an unregulated environment too.
Unlike traditional sportsbook betting, the PvP variety hasn’t been around as long—at least not in a modern format. GameStop currently has the money and name recognition to add value to this gambling niche.
Even though most people don’t visit land-based GameStop stores to buy video games, they know the name. Such a brand throwing its hat into the player-vs-player betting ring would certainly help.
LANduel itself is making headways into the regulated PvP sector. With GameStop behind it, LANduel could likely accelerate its progress and gain licensing in more jurisdictions faster.
Will GameStop Ultimately Take the Plunge Into Esports Betting?
GML undoubtedly received a boost from the WallStreetBets crowd. After falling to a $500 million market cap, GameStop has rebounded after the stock buying frenzy that sent it to a $24 billion valuation.
Predictably, its stock price has fallen somewhat and left the country with a $7b valuation. But it’s holding steady and still has time to make a move.
No news has broke on GML moving to purchase Esports Entertainment Inc. That said, nothing is a given right now and GameStop may not ultimately buy GMBL.
In fact, this idea derives from the Citron Research report that GML should seriously consider acquiring Esports Entertainment.
GameStop might be wise to take Citron’s advice considering that it makes sense in many ways. However, only time will tell if GML ultimately decides to make this big acquisition.
GameStop has a second chance of sorts after getting a boost from WallStreetBets and the stock market. What they do with this second life remains to be seen.
Citron Research believes that they should make a big splash in esports gambling. GML would become an immediate player in the PvP betting sector by acquiring Esports Entertainment Inc.
The GameStop name would bring plenty of clout to the young player-vs-player gambling niche. It could also help GML greatly in the process and give their struggling business model a jolt.
Big acquisitions take time. Perhaps GameStop has seen Citron’s thorough report and is at least considering a marquee purchase and move into PvP betting.
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