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Why GameStop Shares Jumped Monday

By Howard Smith - Mar 8, 2021 at 10:32AM

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The meme stock actually had some fundamental news to report today.

What happened

The euphoria around video game retailer GameStop (GME -3.56%) stock had died down after the late-January surge of over 1,500% brought on by Reddit forum WallStreetBets users. But the action picked up again in late February and got a boost today from actual news out of the company. Shares jumped 20% early Monday and remained up 13% as of 10:15 a.m. EST.

So what

Today, GameStop released a business update letting investors know that it has formed a new "strategic planning and capital allocation committee" to be led by Ryan Cohen. The exponential rise in shares in January began after it was announced that Cohen, activist investor and co-founder of online pet retailer Chewy (CHWY -2.00%), was being added to GameStop's board of directors. 

Arrow rising into sunlit sky.

Image source: Getty Images.

Now what

The new committee is meant to help the company transform its brick-and-mortar business to e-commerce. The company said in the release that it wants to become a "technology business." The committee will evaluate "current operational objectives, capital structure and allocation priorities, digital capabilities, organizational footprint, and personnel," the statement added. 

Retail traders that initially drove up the stock price in a short squeeze believed that there was fundamental reason for GameStop's value to grow. Cohen's success with Chewy gave investors hope that he could replicate it with the video game retailer. Today's announcement brings some support to that belief. The question for current investors is whether the stock that had an approximately $1.3 billion valuation to start the year should actually be valued at its current market cap of almost $11 billion if it transforms its business. 

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$95.66 (-3.56%) $-3.53
Chewy, Inc. Stock Quote
Chewy, Inc.
CHWY
$24.47 (-2.00%) $0.50

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