GameStop share price rises again as GME announces crypto firm FTX
GameStop (GME) has entered the world of non-fungible tokens (NFTs) with a partnership with US-based cryptocurrency exchange FTX. In the hour before trading began on the New York Stock Exchange, GameStop shares rose 7%.
In an announcement after market close on Wednesday, the company said the partnership was to introduce GameStop users to the FTX community and allow FTX gift cards to be redeemed on its own site. Chairman Ryan Cohen said he believes gaming audiences hold one of the greatest potentials for NFTs.
Markets were skeptical of GameStop’s revival after reporting a net loss of $107.1 million in its latest quarterly results. This news helped dampen its downtrend somewhat, but its price is still 44% lower than a month ago.
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GameStop (GME) Pricing Chart
Why the partnership?
Ryan Cohen, founder of Chewy Inc (CHWY), was named president of GameStop in 2021. During his time in the public eye, he was quick to reveal his interest in crypto, NFTs, and meme stocks. His investment firm RC Ventures has also made public its intention to become more involved in the crypto world “to produce the best results for all shareholders”.
Of note, the venture capital firm is currently under scrutiny for selling a large portion of the shares of Bed Bath and Beyond (BBBY), with potential “pump and dump” allegations.
The gaming industry has shifted to online downloads rather than physical purchases, a trend that has grown during the pandemic. Allowing customers to use their cryptocurrencies for online purchases makes perfect sense for GameStop (GME).
Another major reason cited for the partnership was to “introduce more GameStop customers to the FTX community and its digital asset marketplaces” to allow GameStop users access to NFT trading.
The NFT marketplace allows game creators to sell their game art to collectors and game customers. How successful this market will be for GameStop remains to be seen. In its most recent earnings, GameStop’s net sales fell 4% while net losses nearly doubled.
FTX has sought to expand its customer base and has partnered with Reddit in a GameStop-like deal to enable crypto payments to Reddit users. FTX also recently launched a non-crypto stock trading service in an effort to reach non-crypto consumers.
FTX token price chart against US dollar (FTT/USD)
The Future of Meme Stocks
GameStop rose to prominence in 2020, when speculative online retail investors participated in buy campaigns to push the stock, along with other so-called meme stocks such as Bed Bath and Beyond (BBBY ), AMC Entertainment (AMC) and Blackberry (BB).
The outlook for these stocks has been difficult to predict due to sporadic activity by market participants, often organized by online campaigns on message boards such as the Reddit subreddit Wallstreetbets.
Peter Madigan, Managing Editor at BNY Mellon, wrote in a meme stock article that “retailer participation is much wider than initially reported, according to market participants. The activity has already targeted dozens of actions in several sectors. This involves a large number of retail investors who have opened commission-free brokerage accounts.
He added: “The cult-like trading among a wider set of retail investors is a sign that stock markets are changing rapidly and that change may be permanent.”