The GameStop saga continues over a year after the meme stock trading frenzy in early 2021. Although it’s trading nowhere near the $483 per share intraday high of January 2021, GameStop surged more than 9 percent before the opening bell on September 8, 2022. Is the GameStop and FTX deal the cause of the sudden surge?
GameStop and FTX have a new partnership deal.
Although the terms of the deal haven’t been disclosed, FTX and GameStop have agreed to a mutually beneficial arrangement. According to a press release, the goal of the partnership is to bring more of GameStop’s customers into the FTX community and its digital asset marketplace.
The following are the key known aspects of the deal:
GameStop will collaborate with FTX on new e-commerce and online marketing initiatives.
Select GameStop stores will carry FTX gift cards.
GameStop will be “FTX’s preferred retail partner” in the U.S.
FTX U.S. is a crypto exchange that isn't publicly traded. FTX U.S. is a separate exchange operated by FTX, a Bahamian crypto exchange. Sam Bankman-Fried serves as the FTX chief executive.
GameStop posted slightly lower-than-expected quarterly losses.
GameStop released quarterly losses on Wednesday that were slightly below the expected amount. As Reuters reported, GME lost 35 cents a share on an adjusted basis in the second quarter. Refinitiv IBES data had estimated 38 cents per share in losses.
Other changes in the most recent quarter include the removal of Chief Financial Officer Michael Recupero as well as a 4-for-1 stock split.
How will the GameStop and FTX partnership impact GameStop?
Reuters noted that according to Wedbush analyst Michael Pachter, the new partnership with FTX “is unlikely to yield meaningful revenue or profit, but it sounds good, so that's a positive.”
GameStop chairman Ryan Cohen didn't sell shares immediately, alleviating a concern of investors. Pachter also said the rise in GME shares reflected investor relief. Cohen’s appointment was hoped to provide an improvement in GameStop’s financial performance.
GameStop also launched a digital wallet in May.
In May 2022, GameStop launched its own digital wallet for the storage and trading of cryptocurrencies and non-fungible tokens (NFTs), reported The Wall Street Journal. The partnership with FTX seems to run parallel with that new division.
GameStop described its digital wallet as a self-custodial Ethereum wallet. It allows users to manage their cryptocurrencies and NFTs across decentralized apps. Users can store, send, receive, and use those digital assets within the digital wallet.
Coindesk reported that GameStop’s NFT marketplace, launched in the summer of 2022, saw strong trading volumes even beating out top crypto exchange Coinbase. The NFT marketplace launched in July, enabling gamers and creators to buy, sell, and trade NFTs.
GameStop’s NFT marketplace has had its problems. Just weeks after its launch, ArsTechnica reported that the platform had been selling unauthorized NFT copies of indie games.