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What's a GameStonk?

The mechanics of what happened—and is still happening—with GameStop’s shares (GME) are clear to us.

Short squeezes take many forms and happen all the time (see VW’s short squeeze in 2008), no real story here. So why all the fuss?

Perhaps it is literally a Robin Hood story. No, not the app, the historic and literary character known for taking from the rich and giving to the poor. The sort of populist uprising of many “Davids” vs. the evil “Goliaths” that the media has portrayed…… uninspiring.

Or is the real story that a “free” online application / service is capturing and selling its users data, in other words we are not the client, we are the PRODUCT? Nope—heard that one before too.

No, these are not the stories, none of this really matters. What really matters in our opinion are 2 things:

1) This would not have been possible if it were not for the artificially and persistently low cost of borrowing. Leverage is so cheap you are derelict if you do not take advantage of it. And in this case we believe BOTH SIDES of the trade were leveraged. That is not a common squeeze factor and portends of more trouble to come.

2) Further evidence of the “Great Disconnect” between the real and financial economies and markets in the post-Covid world, although it started as far back as the Great Financial Crisis.

By pumping trillions of dollars of liquidity into financial markets, the Fed is in the ironic spot of watching certain stock suffer bouts of illiquidity in the midst of a market that is generally overflowing with liquidity.

What is more concerning because of its potential immediacy is what we believe to be 2 of the 4 necessary preconditions for the end of this bull market are now visible:

1) Market accident(s)

2) Steepening / Steep yield curve

What started as an observation of one on the most shorted stocks on the market posted on a relatively niche internet forum for “investing” (read: gambling; the name of the subreddit is literally “WallStreetBets”) turned into an explosion of market fundamentals. When famed icons such as Michael Burry of The Big Short and Ryan Cohen of poured money into GameStop (GME) as early as 2019, some took notice, but most wrote it off as a bad investment. It was only recently, around one month ago, when Ryan Cohen and two of his former colleagues were given board seats to the flailing brick-and-mortar game retailer that the ~2 million subscribers to Reddit’s r/wallstreetbets (WSB) really began to fantasize about the short-squeeze phenomena and the future of GameStop under new, more tech-savvy leadership.

Whereas the large majority of Wall Street institutions saw GME’s stock possibly going to $5/share, WSB saw GameStop’s ongoing pivot to ecommerce bringing the predominantly mall-based retailer to the heights of Amazon. At least, this is the story to tell for those seeking an explanation based in fundamentals, which this remarkable tale is ultimately not.

No, as the stock rocketed past heights previously unfeasible to an all-time high of $483/share and the once small Reddit forum grew to over 8 million subscribers, fundamentals undeniably went out the door. Many subscribers early and late to the game alike would take on incredibly risky (and often, we believe, leveraged) options plays on the stock, just for the chance to stick it to the posh Ivory Tower institutions of The Street. As it became clear many of those groups who had a price target of $5/share were being hurt by the steep ascent of the stock price, some being forced to close out their short position (perfectly playing into the short squeeze), only more came for the chance to participate in what many news organizations were calling historical.

As the dust settled and the daily trading volume of GME declined dramatically over the course of a few weeks, it appears (at least of this writing) some kind of compromise was struck between market fundamentals and the sheer combination of will and momentum of some 8 million retails traders. After suffering significant losses during the first week of February, declining to ~$92/share as of the morning of February 3rd, it is still unclear what will become of the almost folk-like hero status GameStop achieved during the past month.


Anfield Capital Management, LLC is a registered investment adviser with the SEC. This report is for informational purposes only and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities. The contents of this report should not be relied upon in making investment decisions. The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness. The accompanying performance statistics are based upon historical performance and are not indicative of future performance. The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients. While many of the thoughts expressed in this report are stated in a factual manner, the discussion reflects only Anfield Capital’s beliefs about the financial markets in which it invests portfolio assets following the models. The descriptions herein, are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any model. Any prior investment results or returns are presented for illustrative purposes only and are not indicative of future returns. Investments with Anfield are subject to significant risks, which include, but are not limited to, the risk of loss of principal, lack of diversification, volatility, and market disruptions. Prospective investors are referred to our Form ADV 2A for a more detailed discussion of risk factors, which can be (a) found on the SEC's Investment Adviser Public Disclosure website at:, or (b) provided upon request. You should not construe the contents of this report as legal, tax, investment, or other advice. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein by Anfield Capital, its employees and no liability is accepted by such persons for the accuracy of completeness of any such information or opinions. Registration as an investment adviser does not imply a certain level of skill or training and no inference to the contrary should be made.

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