Shares of GameStop (NYSE:GME) are surging higher, along with the rest of the market, on no company-specific news. Still, GME stock is down about 30% year-to-date, driven by sustained inflation, rising rates and a weak consumer.
Meanwhile, GameStop reported a fiscal second-quarter net loss of $108.7 million, equating to an earnings per share loss of 36 cents. As an unprofitable company, GameStop is especially susceptible to rate increases. This is because the majority of its valuation is based on future cash flows discounted back to the present value. When rates rise, the values of these discounted cash flows declines.
On top of that, spending for video games has declined along with consumer spending. Mat Piscatella of NPD noted last week that spending on video game content, hardware and accessories declined by 4% year-over-year for the month of September. Overall spending has declined by 8% compared to last year.
Still, GME stock carries a high short interest of 20%. That’s more than enough to drive a short squeeze and equates to 51.09 million shares sold short worth $1.28 billion.
Shares of the company are miles away from their 52-week high of $63.92, although loyal meme stock investors haven’t lost hope just yet. GameStop also boasts several reputable institutional investors betting big on the meme stock.
5 Investors Betting Big on GME Stock
Tracking institutional ownership is important, as these large investors provide liquidity and support for stocks. During Q2, 264 13F filers reported owning GME, a decline of 11 funds from the prior quarter. Furthermore, the institutional put/call ratio sits at 1.11, up from 0.87 during Q1. That’s equivalent to 40.15 million calls and 44.74 million calls, implying a bearish options stance. With that in mind, let’s take a look at the company’s top five shareholders:
- RC Ventures, an investment vehicle owned by Chairman Ryan Cohen: 36.40 million shares. RC’s stake is accurate as of Q1.
- Vanguard: 23.88 million shares. Vanguard purchased 44,988 shares during Q2.
- BlackRock (NYSE:BLK): 20.64 million shares. BlackRock sold 238,196 shares during Q2.
- State Street (NYSE:STT): 6.8 million shares. State Street purchased 64,112 shares during Q2.
- Geode Capital Management: 3.25 million shares. Geode purchased 80,412 shares during Q2.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
