Introduction Why GameStop? GameStop's Direction Recommendation

Introduction Why GameStop? GameStop's Direction Recommendation

Scott Anderson Shorting GameStop Chief Risk Officer Introduction Recommendation Why GameStop?  Terese Kelly Investment Group (TKIG) Investment ...

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Scott Anderson

Shorting GameStop

Chief Risk Officer

Introduction

Recommendation

Why GameStop?

 Terese Kelly Investment Group (TKIG) Investment Analyst (May 2013-Present)  TKIG - Student run investment group that invests with real money thanks to a generous donation by UB alumna Terese E. Kelly  TKIG had only taken long positions on equities  Entered unchartered territory - pitched a short position on GameStop (GME)!

100 Shares at $52.62 GME Price $38.52 (3/7/14)

 GameStop had many external advantages working in their favor  I believed many of these favorable factors could have been priced into the stock already  Their business model wasn’t suited for long-term growth  The gaming industry was progressing into the digital age and leaving GameStop behind

Methodology  Reviewed GameStop’s financial documents (10K’s & Financial presentations)  Conducted Industry Analysis  Perused publications  Identified key drivers (Growth in Digital Sales)  Examined changes in consumer demographics  Current gamer average age is 30  55% men and 45% women  Conducted Competitive Analysis

Gaming Revenue 2012 (Billions)

GameStop’s Direction 

  

Focus on electronics  Investment into Texas refurbish center Continued emphasis on used games Exclusive content arrangements Limited push into digital despite purchases of Jolt, Spawn Labs, Impulse and Kongregate

Industry Direction Growth in Digital Gaming

Key Statistics Stock Price: Market Cap: Avg. Vol. (3m): EPS: Div & Yield:

$49.65 (9/27/13) $5.8 Billion 2,210,540 -2.49 1.10 (2.20%)

Challenges  Many of GME shares were shorted in 2013  However GME share price rose and many of those investors got “squeezed” out  Positive environment  Holiday season was approaching  New gaming consoles were going to be released  Grand Theft Auto 5 sets world records in sales.  Unlimited potential liability

Digital Continues to Grow Share 120% 100% 80% 60%

72%

69%

60%

20%

28%

31%

40%

2009

2010

2011

2012

80%

40% 20% 0%

Digital

Physical