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GameStop – Gamifying the stock market?

GameStop – Gamifying the stock market?

Earlier this year, you likely saw headlines regarding GameStop’s share price going from around USD 10 per share to USD 500 per share and then back down to USD 50 within a few weeks. Driven by Reddit day traders, it was hard to miss their effect.

Figure 1: Price and Volume of Traded GameStop Stock, in USD
Source: SPCapital IQ

What does GameStop’s volatile share price mean for you?

The rapid rise of GameStop, despite poor earnings results and a number of sell side analyst downgrades over the period, demonstrates the increasing power of herd mentality and momentum on share prices.

As humble valuers we aren’t weighing in on the philosophical or political merits of hedge funds or day traders, however, the clear overvaluation of GameStop and other stocks for non-intrinsic factors demonstrates the increasing weight of non-traditional platforms and investors in determining share pricing.

Whilst this type of activity is more prominent in US markets at the moment, increasing funds on Australian retail platforms would indicate that Australia is likely to follow suit. Boards and CFOs can mitigate the severity of significant non-fundamental market movements by understanding and communicating the fundamental value drivers for their businesses. For acquirers of listed companies, filtering out market price noise prior to making an offer remains paramount.

We have a number of complimentary tools available to help you on our resources page.

OTHER NEWS

Discount Rate 31 Dec 2023

Market Discount Rates – 31 December 2023

Optimism around the easing of inflation and potential interest rate cuts led to a rally in equity markets towards the end of December 2023. With markets continuing to fluctuate significantly, the selection of a reasonable discount rate remains a key consideration, whether for the purpose of financial reporting or for any valuation analysis.

Discount rate September 2023

RISING MARKET DISCOUNT RATES

Markets have declined over the last quarter as persistent inflation and the potential for further rate rises continue to weigh on the ASX 200. These fears have seen a rapid increase in government bond yields over the last month. With market conditions continuing to evolve rapidly, we have provided an update on our assessment of discount rates as at 30 September 2023.

Simon Dalgarno celebrates 25 years

25 Years at Leadenhall: Simon Dalgarno celebrates

After 25 years at Leadenhall (and in the valuation profession) Simon Dalgarno was lucky enough to have the entire month of May off as leave. During his time off, he went on a pilgrimage – which was both professional and personal.