What happened

Shares of video game retailer GameStop (NYSE:GME) rose 58.2% in November, according to data from S&P Global Market Intelligence. The gains started when an activist investor presented a radically different business plan for GameStop.

So what

Under the leadership of growth-oriented pet food retailer Chewy co-founder Ryan Cohen, venture capital firm RC Ventures built a 10% ownership stake on GameStop before proposing a dramatic strategy shift. On Nov. 16, RC Ventures sent a public letter to GameStop's board of directors. In the letter, RC underscored the explosive growth that is happening in the video gaming industry and noted that GameStop should be able to capture lots of shareholder value with the right strategy.

"Unfortunately, it is evident to us that GameStop currently lacks the mindset, resources and plan needed to become a dominant sector player," RC Ventures said. "In the two most recent quarters alone, the Company has lost another $277 million. To add insult to injury for GameStop's stockholders, the size of the global gaming market has grown by more than 2.5x since the last console cycle."

GameStop shares rose 9.5% the next day and have been trending upward ever since.

Close-up shot of a female hand writing Dear Board of Directors on a sheet of papyrus.

Image source: Getty Images.

Now what

RC Ventures wants GameStop to forget about physical hardware sales, and instead focus on e-commerce sales and digital streaming. The company should sell off its European and Australian store networks, decline to renew expiring store leases, and invest the upcoming cash windfall from the gaming console refresh into innovative, all-digital gaming services, RC argues.

"Taking the right steps in 2020 and 2021 can enable GameStop to own a bigger share of the market when estimated industry sales explode to more than $200 billion per year in 2023," the letter continued.

Investors embraced the call for action. By the end of the month, GameStop's shares had soared 491% from the market bottom in early April. RC Ventures' ideas make a ton of sense, but I am not holding my breath while waiting for GameStop's leadership to adopt a dramatically different strategy. Short-selling investors have a massive interest in this stock, and for good reason. GameStop's skyrocketing stock seems to be primed for a fiery crash at this point.