GameStop NFT (both the words & design), GameStop Wallet, and GameStop Blockchain have all been filed by a separate entity called GME Entertainment LLC.
This community has long speculated a dividend of some sorts related to the NFT expansion and I wanted to share my thoughts on the matter in hopes of getting some constructive feedback going this weekend so I can have something to do other than play LoL…
Ok, so we have 4 new filings under a different entity; Gamestop Inc. is what the company has traditionally used for other marks. Separating these “blockchain” related assets from the core company is likely the footprint for a future spinoff where GME shareholders get some type of an allocation in this new entity which I’ll call GMEE for simplicity.
I’ve seen some dialogue today regarding Overstock and I wanted to share my outlook – GameStop’s dividend WILL NOT be like OSTKO, it will be better. In case you aren’t familiar with the subject, here’s a good post to get familiar with Overstock’s digital dividend – post
Basically, shareholders of OSTK received 1 share of OSTKO for every 10 shares they held of OSTK (Overstock Press Release). With total shares outstanding of 43,000,000 at the time for OSTK, the company issued roughly 4,000,000 OSTKO; OSTKO has no actual business activities, but GMEE does.
For people on Twitter saying the Overstock squeeze was cut short or a cash payment was made which poured water on the fire, I ask you to back up the claims with facts, otherwise it’s just FUD. Whether the intention of Patrick Byrne was to squeeze the shorts or to create awareness for his new tZero platform, the fact is the share price of OSTK went from $3 to $127 in a little over 5 months.
Aug 17 ’20 – $127.84 per share
As for OSTKO, shareholders of OSTK received their digital dividend on May 20th, 2020, and the price of OSTKO went from around $15 to $100.
The peak of OSTKO was also around August 17, 2020, similar to the peak of OSTK.
Ok, now that you have an understanding of how both OSTK and OSTKO moved over time, it’s also worth reading here to learn about how brokers allowed shareholders to trade their OSTKO even though Overstock did not permit this – Seeking Alpha Article
So getting back to GMEE, if a spin-off does happen and GME shareholders are rewarded with an allocation in the form of a tokenized security, I think the reality is that no one knows what is going to happen to synthetic shares, including GameStop. As the previous article stated, brokers basically did whatever the F they wanted. Draw your own conclusions…
As a shareholder of GME, I try not to speculate, but I feel it is important to do the research and gain a better understanding of what could happen to my investment in the event of a stock-dividend, squeeze, spin-off, etc. One of the key differentiators between OSTKO and GMEE is that the latter is actually a player in the multi-billion dollar NFT industry; GMEE is a real business with real revenue and infinite potential.
So while I believe ownership in GMEE through a tokenized security is a great way to squeeze GME shorts, it also seems like a great way to unlock value as there may be investors who want to purely invest in this business. And this brings up a good point, what is this NFT business worth?
This is the one thing that has been on my mind for several weeks. If GMEE is spun out of GME, and let’s say there are 76,000,000 share in GME, and you get 1 share of GMEE for every 10 shares of GME, what are those 7,600,000 GMEE tokens worth?
Now one could just argue simple dilution, where GME shares are worth 10% less, but if the spin-off happened today (closing price of $98.39 on May 13, 2022), do you think GMEE is fairly valued at $750,000,000? Basically 1/10th of Friday’s closing market cap.
I would argue $750,000,000 is a very low number as OpenSea is valued at more than $13bn. So wut then?
This is where it gets interesting, and this to me is the most important piece of the puzzle, of not only squeezing shorts but also presenting a strong case for GMEE token recipients to hold for a long time. Like any valuation exercise or real world investment, there is no right answer. Sometimes VCs are lucky and they come in early, and sometimes they come in too late (think SoftBank and WeWork).
So the future of GMEE really hinges on this unknown, or InvestorX, and this is what I believe will be the greatest surprise that RC will be announcing in due time. InvestorX will be the one that makes an investment into GMEE that cements the valuation of the spin-off entity. For example, if Apple invested $1bn for a 20% stake in GMEE, then the company is worth $5bn, and right away those GMEE tokens you received at $750,000,000 would now be worth 6.67x more (ceteris paribus), without a squeeze and without other investors coming in.
Ok, this is a good time to celebrate. I had several other thoughts I wanted to share but I think I’ll save that for another time.