GameStop should ditch retail and become a holding company like Warren Buffett’s Berkshire Hathaway

GameStop should ditch retail and become a holding company like Warren Buffett’s Berkshire Hathaway

It’s GameStop time (GME) to put a fork in its struggling retail operations and embrace a second life as a holding company in the mold of Warren Buffettby Berkshire Hathaway (BRK-A)(BRK-B).

GameStop is “a totally different company now,” a retail expert and investor said. Jeff Macke on Yahoo Finance’Opening offer‘ Podcast (video above; listen here).

Although he now refers to GameStop as “dumper of a company,” Macke’s sentiment was not always so cold. He said he held his shares five years ago when they were trading at $4 a share, believing his operations were undervalued.

He later sold the shares for $25 per share.

“I thought I was the genius of all time,” he said.

But Gamestop is full of fundamental misfortunes lately, which has raised questions about whether the Ryan Cohen-led company is even a retailer anymore.

Fiscal first-quarter results included a loss of $32.3 million on revenue of $882 million. Notably, GameStop lost $50.5 million on revenue of $1.2 billion last year.

The company continues to be hit by structural changes in the video game industry – from the shift to digital downloads to competition for eyeballs with streamers like Netflix (NFLX), to an aging console game base.

Cohen basically hid, not appearing in the company’s notoriously short earnings calls. His plans for GameStop are not known to his loyal Reddit followers or big investors. Senior managers have left the position over the past two years.

GameStop also no longer has any sell-side research coverage on Wall Street, a byproduct of the stock’s insane volatility and Cohen’s relative secrecy.

Amid the latest round of poor results, GameStop promoter Keith “Roaring Kitty” Gill returned to the scene on June 7 in a weird live stream; he once again touted the company, causing the stock to rise temporarily.

This follows a social media post from Gill several weeks earlier – after a long absence – that many GameStop loyalists considered optimistic.

Cohen took advantage of this frenzy to strengthen GameStop’s coffers.

The company received $2.1 billion last week after selling an additional 75 million new shares. About three weeks earlier, it sold 45 million shares, netting $933 million.

Investment professionals like Macke wonder what Cohen will do with all that money. Will he buy companies like Berkshire Hathaway? Does he put it in Treasuries and individual stocks Buffett-style to get a return?

Either way, this sounds more like a CEO running an asset management company or holding entity than a CEO looking to create incredible store experiences for shoppers.

Either way, Macke considers investing money in physical stores to be far from ideal.

GameStop’s dead malls and outdated merchandise models are two of its many problems, he claimed.

Instead, he envisions a scenario in which GameStop abandons dead malls and attempts to operate as a holding company.

“Berkshire Hathaway was a failed textile company when Warren Buffett took over,” he said, adding that GameStop is more like “Berkshire Hathaway for idiots.”

But, with $3-4 billion in liquidity, the challenge is finding the best way to implement this. “It won’t be in GameStop,” he adds. “It will be in other opportunities.”

Speaking of famous holding companies, billionaire Warren Buffett’s son, Howard G. Buffett, jumped on the topic.Opening offer‘ Podcast to discuss his father’s decades of work at Berkshire Hathaway. Listen below.

Grace Williams is an editor for Yahoo Finance.

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