Financial Management of Game Point

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Definitions

Risk is a significant component that drives human action in a variety of ways and forms. However, a man behaves rationally and constantly attempts to reduce risk, enhancing return predictability by employing optimizing strategies and tools. The risk may be divided into three categories: risk lover, risk averter, and risk-neutral. According to Engle et al. (1990), a heatwave is the conditional Variance of the returns in one market-determined only by the market’s previous shocks. The heatwave concept is compatible with the notion that significant disruptions are changes in spot market fundamentals and that a huge shock raises volatility solely in the spot market.

Large shocks can be caused by new information (Engle, Ito, Lin (1990) such as the central bank raising or reducing interest rates. In the futures market, the heatwave theory is comparable to a zero coefficient. The meteor shower corresponds to a 0 coefficient on the spot market term. This mechanism of transferring volatility from one market to another may be thoroughly investigated.

Practical implications of both Hypothesis

The heatwave concept is compatible with the notion that significant disruptions are changes in spot market fundamentals and that a huge shock raises volatility solely in the spot market. Large shocks can be caused by new information (Engle, Ito, Lin (1990) such as the central bank raising or reducing interest rates. In the futures market, the heatwave theory is comparable to a zero coefficient. The heatwave concept is compatible with the notion that significant disturbances are changes in nation-specific fundamentals and that a substantial shock raises conditional volatility exclusively in that country. Meteor showers may also be associated with market inefficiency.

Some sorts of technical, analytical conduct, for example, may exhibit this trait. However, monetary policies that are cooperative or competitive are another interpretation of the meteor shower. If the Fed’s policy shift raises the uncertainty of the Bank of Japan’s monetary stance or vice versa, this will manifest as a meteor shower. This interpretation violates neither weak nor strong form market efficiency.

Transmission of Information and International Portfolio Diversification

Globalization is the result of international trade and investment. Entity investors primarily invest in an overseas portfolio venture (or overseas indirect venture), which is defined as “the investment in overseas economic mechanisms such as government unions, commercial bonds, shared funds, and overseas stocks by individuals, private companies, or public organizations (e.g., administration or nonprofit institutions).” (Steinberg, 2018)

Portfolio reserves must be increased to decrease risk and include a mix of domestic and international venture techniques, scenarios, and shares. This legislation aims to decrease investment losses and be widespread across the board (Steinberg, 2018). When expanding in local and international ventures, rarely, all divisions inside a specific marketplace do not execute to offer a shareholder some growth. As a result, diversification benefits both the company and the group shareholders.

Faster transmission of information between markets plays a vital role in realizing the benefits of international portfolio diversification. The benefits of investing overseas are greatest for investors in emerging nations with effective information flow across markets. Most of the benefits are acquired by investing outside of the home country’s territory (Giofré, 2017). When short-sales limits in emerging stock markets are taken into account, the benefits of global diversification remain significant. The benefits of foreign portfolio diversification tend to be greatest in nations with high country risk. In addition to this cross-sectional data, the advantages of diversity shift over time as nation risk varies.

Introduction

Game Point is a leading American business that specializes in video game consumer electronics and gaming merchandise. They sell video game hardware, as well as tangible and digital video game software. Their primary operating segments include the United States, Canada, and Australia. Video game companies sell various commodities to customers in other parts of the world. The GameStop is highly ranked to compute among the leading top five in the8more significant toy retailing operation sector (Schrantz, 2018). The organization operates in approximately 1750 stores spread across 49 states.

Since GameStop’s inception in 1984, the company’s management and business performance have been extremely beneficial to the owners and partners at large. This has changed in recent years due to market changes and the development of new market strategies that significantly impact GameStop’s overall operation. The development has raised concerns about the operations of the GameStop organizations. There are concerns about the organization’s market process and the control of its daily business operations. The purpose of this paper is to investigate the case of GameStop, emphasizing the organization’s success under the influence of investing techniques as a financial analyst.

Background and Purpose of the Report

Since the beginning of the global pandemic, GameStop’s operations have declined by a much greater percentage. They have faced numerous challenges to keep their operations running in the face of pandemics. They are experiencing sales difficulties as a result of the recent global pandemic. The report’s goal is to conduct a financial analysis to build a case for GameStop. GameStop’s efforts to keep up with economic changes on a global scale have been severely harmed by the collapse of the commodity selling market. Individuals’ disagreements about where they will spend their money have raised serious concerns about GameStop’s operations.

Despite the impact of the pandemic, it has remained an organization with limited practices in the current economy where individuals can decide to invest. The fear of investors that they will be subjected to a higher value of loss has become a major concern in determining which areas to specialize in. People are afraid of the risk of running a business at a loss, which is expected to be GameStop’s direction as they reduce their daily operations in a much more excellent way as a result of the pandemic (Schrantz, 2018). The result has been a reduction in salary wages among GameStop employees and the loss of a job for some in the organization.

The decrease in the sale of the organization’s product has resulted in a decrease in the level of profit initially realized through the organization’s business forms across the United States. The report will serve as a clear evidence in the case, which will impact the company’s overall operation. Creating a reflection from the sales update, store operation, and the organization’s liquidity rend will establish an argument that will act as a plan in the financial analysis of the GameStop organization. For example, the recent impact on the closure of operating stores has projected a significant influence on the organization’s flow of profit and operations. The effects will serve as a backdrop for an examination of GameStop’s market operation and how they strive to adapt to the effects that have reduced their overall operation in various ways.

Analysis of GameStop Stock Performance around short Squeeze event

In a short time, the stock performance of GameStop has significantly altered the organization’s operations. It has had a far-reaching impact on the organization’s sales and purchasing power level, making it easier to carry out the organization’s agenda. To maintain the stock-flow in the business, GameStop is attempting to change its initial method of operation. To compete with market competitors, GameStop has reached a tipping point in determining the best practices to enable market operation with much greater ease and efficiency. Individuals are increasingly engaging in in-game downloads over the internet and through subscription services, which has altered the stork of cooperation in a significant way. Fear of a low amount of sales to the market has significantly impacted the organization’s stock from December to March.

Software developers have maintained a consistent release of free-to-play games to gamers worldwide, which has reduced GameStop stock sales in a variety of ways. They are experiencing a high level of low sales because their consumers and customers have shifted their focus from the sale of stock that they initially witnessed and purchased from GameStop businesses to the download and purchase of video games from software developers.

Consumers’ purchasing power of GameStop stock has changed due to the benefit of receiving free video games from new software developers (Vasileiou et al., 2021). This has also resulted in a drop in the overall value of the organization’s stock. Since the beginning of the year, GameStop shares have been subjected to a high level of depreciation. It has been fueled by retail investors seeking ways to embrace companies championed in online forums such as WallStreetBets.

This has increased the organization’s level of competition in the field of business and operation, which impacts the overall performance of the stock. The decrease in stock sales has reduced the organization’s level of competition in the business operation. The effect has impacted the level of profit that the company was initially associated with because they were in a constant operation where they maintained a high stock sale.

Analysis of short selling strategy and its role in the short squeeze

Investors have developed a strong belief that the stock price of GameStop is on a downward trend. The practice of short selling allows investors to profit from stocks when their value falls. It entails borrowing stock or securities from individuals who own them via their brokerage firm. The strategy has helped create a new way for the organization to stay in business and maintain the high level of competition that it initially saw in business operations (Vasileiou et al., 2021). The short-selling strategy has enabled the organization to reduce the risk of being disbanded due to reduced sales practices or a lack of stock for consumers to buy from the organization. The strategy can be used to hedge long-term exposure in an indirect manner.

It assists the organization in retaining the trust of their customers, who may be tempted to associate with other competitive organizations that provide substitute services and products due to the threat of closure. It depicts the organization at a point where it is difficult for customers to understand the difficulties that the company is facing in its efforts to provide services to esteemed customers worldwide (Vasileiou et al., 2021).

The practice of short selling assists GameStop in lowering the amount of capital required to purchase new stock to maintain the business’s efficiency. It assists the organization in retaining the trust of their customers, who may be tempted to associate with other competitive organizations that provide substitute services and products due to the threat of closure. It depicts the organization at a point where it is difficult for customers to understand the difficulties that the company is facing in its efforts to provide services to esteemed customers worldwide (Vasileiou et al., 2021). This will increase the organization’s level of sales because they will be able to afford new products in the market through the short-selling strategy, which will help the organization compete effectively in the market.

Furthermore, it can increase profit generation for the business, which can strengthen the organization’s fallen branches and partners in the business operation. Because of the influence of low capital, the short-selling strategy attracts more traders. The effect can help the organization attract the attention of new investors in its target market. The benefits realized from investing in the organization’s business operations can be used to establish and strengthen the organization’s operations (Jarrow and Li, 2021). The investment can help the organization expand its scope of operations. In addition, it plays an important role in market expansion, which will result in increased sales of the organization’s commodities, allowing the organization to generate more profit in the business field.

In addition, short selling during a short squeeze can provide the organization with liquidity to the market, resulting in a drop in stock prices. A decrease in the price of a stock may enable the organization to purchase more stock in response to consumer demand. The availability of stock can help the organization keep its customers during the crunch period, allowing it to run its business in the most efficient way possible. During the squeeze period, it also plays a role in price discovery. It can increase profit generation for the business, which can strengthen the organization’s fallen branches and partners in the business operation.

Because of the influence of low capital, the short-selling strategy attracts more traders. The effect can help the organization attract the attention of new investors in its target market. The benefits realized from investing in the organization’s business operations can be used to establish and strengthen the organization’s operations (Jarrow and Li, 2021). The investment can help the organization expand its scope of operations.

During the short squeeze time, GameStop is exposed to a significant amount of risk in its operations, which can be mitigated by the short selling technique. The dangers that might lead to the organization’s area of operation falling into disarray can be mitigated by employing a short selling strategy during the squeeze period (Jarrow and Li, 2021). It enables a high degree of investment in the firm, which may be employed as a long position that relies on the organization’s overall performance in the market. It also serves as a method for developing new ideas in the business that may help the organization function smoothly during the organization’s brief term of existence.

This will lead to GameStop’s venture into new strategies that can help it rise during the effect of the short squeeze period and compete effectively in the market with other competing firms in the market by providing high quality and efficient goods in the market to attract the attention of the customers (Jarrow and Li, 2021). In general, the practice will play an important part in the functioning and growth of the GameStop over the brief term of existence.

Analysis of the role of Fintech or Blockchain in the case Affecting Investment Strategies

Fintech incorporates innovations into financial services organizations’ provision to improve delivery to consumers and users. It entails the utilization of insurance, cryptocurrency, and mobile banking. They provide financial assistance to businesses in times of need. On the contrary, blockchain is a data storage structure that makes it difficult or impossible to alter, hack, or cheat the system (Riasanow et al., 2018). The use of Fintech and Blockchain as a strategy in the operations of organizations may have an impact on GameStop’s investment strategies. They serve as security strategies for the organization’s liquid assets. They are associated with highly developed security protocols that are difficult to breach.

The Fintech and Blockchain strategy will allow the GameStop organization to attract more investments from different individuals worldwide, as they will prefer to do business with organizations with a high level of security. Additionally, the short squeeze period strongly discouraged the handling of wages in cash. Adoption of Fintech and Blockchain practices enables wireless money transfers from one individual to another and across business operations.

The Strategies are also unaffected by continental borders or state boundaries. This will make it easier to conduct business around the world because the organization will overcome the limitation of a lack of payment methods from other countries. This will impact the organization’s business activities because it will be able to reach more consumers all over the world. Fintech and Blockchain practice also enables organizations to keep track of payments made in the field of operation (Riasanow et al., 2018).

The effect assists the organization in controlling the risks of incorrect transactions in the business field, which may result in a variety of losses by the business in the normal operation of the business plan. They aid in reducing third-party involvement in business operations, which aids in the preservation of operational time and cost in business operations.

Implication for regulation policy, the market, and investors

The guidelines and policies have a much greater impact on business operations. The regulations can act as a business security measure by providing the business side with the highest level of security in conducting business operations. This will aid in the protection of business rights violations that can be prosecuted in the business field. Furthermore, they serve as guidelines that govern how businesses conduct themselves and compete (Moşteanu & Faccia, 2020). The influence will aid in creating a business environment full of business ethics that influence the protection of business operations. The market may also impact how the business operates (Lehoux et al., 2017). A low market level will restrict the company’s sales in the market for consumers. It can also limit the number of business operations that can occur in a given area.

A company is more likely to succeed when it can make a large number of sales, which are highly dependent on the size of the market operations. The investors may have a far-reaching impact on the business’s operations. An organization with many investors may experience high profit because they may be able to engage in various operations on the business plan that help generate more business opportunities.

Investors can also help with the expansion of the market for the business, which increases the volume of sales and contributes to a high chance of profit in the business practice. On the contrary, the regulatory policy can scare away investors, which can have a negative impact on business operations. A market with a low level of ethics may also impact the operation of the business, which can contribute to the loss of the business.

Conclusion

In summary, GameStop has undergone various changes to keep the business running at its peak during the short squeeze event. The stock’s performance has been heavily influenced in a short period, which has altered the overall operation of the business. The short-selling strategy has paved the way for GameStop to reclaim its market niche. To facilitate the safety of business operations, the organization should implement innovative financial practices in its business operations. Furthermore, GameStop should concentrate on the positive impact of regulation, market, and investors on business operations to expound the business activity and work toward converting negative activities into benefits that can positively influence the business.

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Vasileiou, E., Bartzou, E. and Tzanakis, P., 2021. Explaining Gamestop Short Squeeze using Ιntraday Data and Google Searches. Web.

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