Are you familiar with the term SPAC? SPAC stands for Special Purpose Acquisition Company, and CNBC’s Jim Cramer recently compared GameStop to one. According to Cramer, GameStop feels like a massively overvalued SPAC that needs to make an incredible purchase at an insane discount to justify its current stock price. In fact, GameStop’s primary business is struggling, with a revenue miss reported and sales declining by 31% year-over-year.
Despite these challenges, GameStop has managed to raise cash by taking advantage of rallies spurred by “meme stock” investors and initiating large secondary offerings. Many investors believe that GameStop can make lucrative acquisitions to drive up its stock price, but Cramer is skeptical. In fact, he suggested that the company should close its physical stores and operate as a bank.
However, GameStop’s core business may not be as relevant as it once was, as more people are buying games online and the demand for physical game stores has decreased since the latest console launches. In the eyes of Cramer, GameStop is always vulnerable to a short squeeze driven by temporary market trends.
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