When even a presidential candidate is getting caught up in the meme stock mania, maybe it’s time to stop doubting. Independent candidate Robert F. Kennedy Jr. recently said he bought $24,000 worth of GameStop (NYSE:GME) stock. It came after the massive rally and decline in its shares.
But was this just a politician pandering for votes (yes) or a person putting his money where his mouth is to back a business set to soar (probably not)? More importantly, should you be following RFK Jr.’s lead into the video game retailer?
An Ape Rebellion in the Making
The video game retailer’s stock had been trading at around $16 per share but tripled in value in one day to around $48 after Keith Gill made his first post in several years to X. It was a picture of a video game player leaning in towards a video screen. It suggested the person credited with launching the meme stock craze under the pseudonym Roaring Kitty three years ago was interested in GameStop again.
Kennedy horned in on the frenzy that followed. He posted a mock “Planet of the Apes” movie poster to X, showing him with the words “Apes Together Strong.” That is a reference to the group of investors who backed GameStop early on and called themselves “apes” who would hang onto the stock for dear life (HODL). Kennedy called for greater market transparency and said he would support the “Ape retail rebellion.” He also tagged several meme stock accounts, including that of Roaring Kitty.
“To match action with words, I just invested $24,000 in GameStop from the fees I earned from suing Monsanto for their knowingly poisoning our soil and causing cancer.”
While many bought his sincerity, at least in saying he would impose aggressive reforms on Wall Street if elected, it still had all the vibes of Hillary Clinton declaring in 2016, “Pokemon Go to the polls!” Okay, boomer.
A Business in Decline
The question is not really whether Kennedy is an ape himself or just another rent-seeking candidate. It is about GameStop being a viable business and whether it can ever hope to turn itself around.
I’ll admit the video game retailer has hung around much longer than I ever suspected. I’ve come to the view there is a place for GameStop still in the marketplace. But that’s a much different conclusion than GameStop stock being a place to put your money.
GameStop’s business is not good. It might be slightly better than it was a year ago, but it hasn’t been profitable in over six years and there is no real sign it will ever really change. The video game retailer filed preliminary first-quarter results showing it expected to lose $27 to $37 million for the period. That’s better than the $50 million loss last year, but sales are going to fall to a range of $872 to $892 million, down sharply from the $1.24 billion it generated a year ago.
Management, though, is also opportune. When the GME share price took off, management immediately registered to sell up to 45 million shares in a secondary offering that raised almost $1 billion. Good for GameStop, not so much for existing shareholders.
A Meme Stock Meaning Nothing
That is the problem with GameStop. For years, it raised money at the expense of its investors, egregiously diluting without ever improving its business.
Putting money into GameStop stock now is not investing. It is gambling. It is riding a wave of internet chatter and meme stock betting that doesn’t deserve a place in your portfolio. As always, the wave crashes onto the shoals of reality, leaving more devastation in its wake.
While the GameStop business may have a place in the market, its stock is not one you should HODL or for any reason at all.
On the date of publication, Rich Duprey 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.
