From left-for-dead to the next ‘hot brand’, short seller changes view on GameStop

The battle for videogame retailer GameStop’s future took a new twist on Thursday when a prominent investor suggested that the company, which has been at the center of a recent stock trading frenzy, should buy online gambling firm Esports Entertainment Group.

Short-seller Citron Research said in a tweet that such a move would be “obvious and easy to justify (GameStop) stock price.”

Citron Research founder Andrew Left, who has spent two decades investing and producing stock market research, said such a tie-up would be “a major pivot” that would put GameStop on a solid financial footing and introduce the brand to millions of new customers.

“It would be an easy acquisition for GameStop to tuck in right now,” Left said in an interview.

“Some people say it would be a ‘Hail Mary pass’ but I think it would be a major pivot,” he said. He said he owns shares in Esports.

Left’s suggestion sent Esports’ shares up roughly 27% to a three-year high before falling back down to $21, up a shade over 19%. GameStop’s shares were up nearly 60%%, extending a new rally that began on Wednesday.

Esports said on Thursday it has not held sale talks with GameStop. GameStop did not comment.

Jeff Cohen, vice president of strategy at Esports Entertainment, said the two companies have spoken in the past but not about an acquisition.

“We have talked to GameStop in the past about areas within Esports where we might be able to collaborate, but we haven’t had any discussions around acquisitions,” Cohen said.

Only four weeks ago, Left said he was betting against the future of GameStop, describing it as an outdated brand whose products were sold in shopping malls that weren’t being frequented much during the pandemic.

“Six weeks ago this brand was (close to) being dead,” he said. Now it’s a “hot brand” that can raise money and reestablish itself as a strong player, he said, valuing the company at between $8 billion and $10 billion. GameStop was valued at around $6.4 billion before Thursday’s rally.

“What’s changed? I realize that there are millions of kids in this country who like to gamble,” he said. “If they combined, as a short seller, I wouldn’t even think about touching that.”

Left was one of the most prominent short-sellers betting against GameStop in January. Hedge funds, including Melvin Capital, were also hurt by their short bets against GameStop.

Lawmakers in the U.S. Congress last week held a hearing with executives from Melvin Capital, online trading platform Robinhood, and a retail investor who calls himself “Roaring Kitty” and championed GameStop, sending its share price up some 1,700%.