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October 2, 2022

GameStop’s FTX deal is about gift cards. Its stock went up anyway.

GameStop’s FTX deal is about gift cards. Its stock went up anyway.

GameStop’s stock price has long been untethered to business fundamentals. It’s the primordial and quintessential meme stock, a golem of whatever people on social media say it is. The fact that it sells video games from its brick-and-mortar stores and on its website don’t really matter to many of its retail shareholders.

This makes it difficult to write about GameStop’s second-quarter results, but here is the gist:

GameStop’s net sales were $1.136 billion, down 4% from the same period last year. Meanwhile, it lost $108.7 million in the quarter, 43% more than they lost a year prior.

But its stock price rose 10% in after-hours trading. Why?

What does GameStop’s partnership with FTX entail?

Right as the market closed, GameStop announced a partnership with the cryptocurrency exchange FTX. What exactly does the deal entail? Not a lot. Here’s the full press release:

“GameStop Corp. (NYSE: GME) (“GameStop” or the “Company”) today announced that it has entered into a partnership with FTX US (“FTX”). The partnership is intended to introduce more GameStop customers to FTX’s community and its marketplaces for digital assets. In addition to collaborating with FTX on new ecommerce and online marketing initiatives, GameStop will begin carrying FTX gift cards in select stores.

During the term of the partnership, GameStop will be FTX’s preferred retail partner in the United States.

The financial terms of the partnership are not being disclosed.”

In a short earnings call, in which executives did not take questions from financial analysts, Matthew Furlong, GameStop’s CEO, called the new FTX deal a “byproduct of our commerce and blockchain teams working together to establish something unique in the retail world.”

But the only thing that’s clear from this announcement is that GameStop will start carrying FTX gift cards for customers who want to buy a friend or relative cash that they can only use to buy crypto on one specific exchange.

The retailer has its own crypto-related investments but it’s unclear how the FTX deal could factor in. GameStop launched its nonfungible token (NFT) marketplace on July 11. According to the crypto analytics website DappRadar, the marketplace has generated $5.48 million in sales in the past 30 days. Since GameStop charges 2.25% in fees, it has collected an estimated $123,000 in commissions. (In that time, industry leader OpenSea has likely collected about $11.5 million in fees from $462 million in sales.)

Michael Pachter, an analyst at Wedbush Securities, was curt in his comments to Reuters about the deal: “The FTX partnership is unlikely to yield meaningful revenue or profit, but it sounds good, so that’s a positive.”

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