[whamlastxmas]

The TLDR for people who don't intuitively understand why: existing shareholders are diluting their stake in the company by issuing new shares and getting money for those new shares. It's simply selling part of the company. Not profit.

[ball_of_lint]

You're conflating two things here.

Yes, in 2021 GameStop did sell shares to raise cash in a dilutive way. [1]

No, that is not being treated as profit or revenue.

Gamestop had ~418 million in profit in 2025. [2] A fraction of that profit does come from interest income. Ignoring that (say to value the business separate from the cash) they still made ~110 million in profit.

In my personal opinion (not financial advice) Gamestop with the cash it has today is a much more attractive investment than without. If you have worries about an economic downturn, it's a hedge. If you worry about GameStop being able to maintain it's current revenue/profit or volatility, it's runway. There's a variety of ways it reduces the risk of an investment.

[1] https://investor.gamestop.com/news-releases/news-details/202...

[2] https://www.sec.gov/Archives/edgar/data/1326380/000132638026... page 27 has the consolidated results.

[sanswork]

>A fraction of that profit does come from interest income.

More than half of it came from interest income.

Gamestop has been unable to grow revenue since Cohen took over, failed initiative after failed initiative. The only thing saving them is their meme stock nature and a legion of people willing to throw good money after bad allowing them to dilute shareholders to build a warchest.

They have increased profit by closing something like 50% of their stores but you can't grow a retail company by constantly closing stores at some point you have to find a way to make the stores more profitable and in 5 years with tons of different attempts they've not found that. Revenue is down almost 50% in the past 3 years.

Having a pile of cash doesn't matter if you have a leader who has no good ideas for how to invest it to improve returns for shareholders, all it does is allow you to die for longer.

[trollbridge]

Not growing revenue yet being profitable seems far preferable to growing revenue yet having bigger and bigger net losses.

Shareholders seem to agree, as the stock went from formerly around $2.50 to present day about $92 (accounting for splits), dispute the dilution.

[turtlesdown11]

>Not growing revenue

Not growing revenue would be one thing, they're shedding revenue at pace - 50% decline since 2020.

> Shareholders seem to agree

First, it's a meme stock. The market can remain irrational for long periods. Another way to analyze it - almost all of the market cap of ~$10b is the $9b in cash. The shareholder pricing tells you they value the business at it's cash assets.

Gamestop's business of physically selling video games, consoles, etc is a dying/dead industry. Nothing can change the trajectory of the market that is almost completely disappeared.

It's a Blockbuster or Tower Records, a dead business running on fumes and memestock valuation.

[trollbridge]

A strong cash position business like that is effectively a finance sort of business, in other words, exactly the kind well positioned to go conduct an LBO.

[turtlesdown11]

> A strong cash position business like that is effectively a finance sort of business

You are conflating companies that make a lot of cash (and therefore can afford debt service) to a company that has limited cash flow, but has a large pile of cash.

The shareholders would be best served by a special dividend of the cash. Management has shown zero ability to grow a business.

[sanswork]

Tightening your belt is a good thing. No disagreement there but it has a hard limit. You can't just keep tightening the belt and growing profit, at some point you have to start revenue expansion again and from what I've seen Gamestop has no way to do that.

At $2.50 they had massive amounts of debt they couldn't service and a very real chance of going out of business. Then through pure luck they became a meme and were able to extract $10b from investors so of course they are worth more today. There is no growth story though so as meme investors get bored and move on it will move back down to it's asset value unless they find a way to grow again.

[mixologic]

The meme investors can stay irrational long before gamestop gets a growth story. If they haven't given up on their get rich quick scheme that's lasted over five years now, I really don't think they're going to jump ship now.

The sad part is that gamestop is offering 55 billion, yet only has 9 billion in cash. The only way they come up with that much capital to buy ebay is to dilute the existing shareholders to a point that "to the moon" will just be moondust.

[asdfasgasdgasdg]

I was assuming it was going to be an LBO? Surely they don't plan to raise the money in cash.

[ball_of_lint]

Well hey, what do you think about them buying eBay? eBay seems to think a lot of the value is in verification - grading cards, authenticating watches, shoes, handbags. GameStop has a similar business in collectibles and could provide eBay with a physical footprint that would let a lot of that verification happen easier, in-store.

[sanswork]

I honestly don't know anything about ebay these days to comment on them but many many people have tried to make a business of providing a storefront for ebay in the past and they've basically all failed so I don't think that bodes well for the main offering Gamestop has.

Also Gamestops verification business is not done in stores AFAIK. I'm pretty sure they've just partnered with PSA to allow you to drop off cards at stores but they are sent away to be authenticated. The stores don't really add any value for most people in this transaction and add a potential downside in that there are multiple reports of Gamestop store employees stealing cards handed over for grading.

Training retail employees to be proper verifiers seems like a huge risk and a huge cost since you need to train them up on how to handle everything where with centralised grading locations you can have specialists(think antiques roadshow).

[hattmall]

The verification stuff is minimal. That's not where eBay makes it's bulk of money but it's a reasonable growth area. There's a huge opportunity though for eBay or someone to tie several loose ends and concepts together and have a serious competitor to Amazon.

[intuitionist]

Worth also pointing out though that if you can sell new shares above intrinsic value that is accretive to existing shareholders. Dilution isn’t always a bad word. (It’s bad for the people buying new shares.)

[CobrastanJorji]

Well, partly it's an audience thing. Hacker News has a lot of folks who work at tech startups, and if you work at a tech startup, dilution is nearly always a very bad word for you.

[rahimnathwani]

If you work at a tech startup then you probably hope your company raises an additional round of funding, i.e. you hope you get diluted.

[LtdJorge]

Isn’t that done with already existing shares (from the founders)? Then it wouldn’t be dilution.

[rahimnathwani]

No.

The main purpose of a funding round is for the company to sell shares and receive cash (e.g. to spend on marketing), not for founders to sell shares and receive cash (e.g. to spend on Ferraris).

(Sometimes, at the same time as a funding round, founders may also sell some existing shares to the new investors.)

[mcmoor]

Yeah I'm also always confused whenever I heard that a company issues new stocks. Why would existing shareholders agree for that? If there's more comprehensive resources about this I'd love to read it.

[skrbjc]

Basically a ponzi at that point

[gruez]

Bubble? Yes. Ponzi? No. The latter requires some element of deception/fraud. Strategy Inc. (formerly MicroStrategy) was basically something similar. They had $x worth of bitcoin in a vault, but were selling themselves for $2x.

[arcticbull]

Well they are raising capital to hand out in dividends on their preferred stock. So that's much closer.