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Why GameStop Stock Is Falling Today

By Rich Duprey - Jun 25, 2021 at 12:50PM

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Lower days that follow higher ones seem to be the norm lately.

What happened

Shares of GameStop (GME -2.60%) were down 4% in midday trading Friday on what seems to be recurring volatility for the meme-stock poster child. 

So what

Earlier this week, the video game retailer announced it had raised $1.1 billion by selling 5 million shares at an average price of around $225. As it tries to transition to a business model more focused on e-commerce, it has used the support of retail investors who are taking on hedge funds that short its stock to build up a financial arsenal.

Man holding head and looking upset while playing a video game.

Image source: Getty Images.

GameStop's stock is up over 1,025% this year and stands more than 4,400% higher than it did a year ago when it appeared to be careening toward bankruptcy. But stock traders in internet chat rooms rallied around its shares, sending the stock soaring and allowing the retailer to bolster its coffers to effect the needed turnaround.

Now what

GameStop is going to be subject to wide swings in its stock price as this battle continues to play out between short-sellers and meme stock investors. 

Although there is a lot of risk, since it's uncertain whether the video game retailer can successfully make the U-turn, it seems to have the best chance it's going to have financially. Chairman Ryan Cohen has brought on some smart executives from Amazon, Alphabet's (GOOG 0.19%) (GOOGL 0.33%) Google, and elsewhere, suggesting that in addition to the money needed, GameStop has the brain power to accomplish the task as well.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

GameStop Corp. Stock Quote
GameStop Corp.
GME
$39.68 (-2.60%) $-1.06
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$122.08 (0.33%) $0.40
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$143.18 (-0.26%) $0.37
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$122.88 (0.19%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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