Odd Lots - This Is What Happened to the GameStop Mania

Episode Date: May 12, 2022

The first true meme stock was GameStop, which went wild in early 2021, delivering brutal losses to short sellers, and a fortune to a handful of independent retail investors who participated in the squeeze. The episode shined a bright light on the WallStreetBets subreddit and the power of social media in disseminating trade ideas. One investor who did well was Rod Alzmann, who had been long GameStop for years as a value/turnaround play. On this episode of the podcast, we speak with Rod, the founder of Wook Capital and the proprietor GMEdd.com. We discuss where the company is now and what happened to the cohort of traders who scored big during that episode. See omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa play the podcast, OddLots on Amazon Music. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a very important. It's a very much. It's a lot. It's a firm. It's a few. It's a few. It's a commitment to your clients. We're talking top grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com

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Fast internet, long ad. But it's so worth it. Visit bell.ca for more details and to check availability. Bell, connection is everything. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. You know, Tracy, we talked recently about the aftermath of the meme stock mania.

But even within the meme stock mania, there were some stories specifically that were just really extraordinary and worth revisiting. Oh, absolutely. I mean, each one of those individual sort of stonks was fascinating to watch. But among them all, I feel like GameStop has to, like, that one has to stand out because that's where it started. So the two big ones were, I think, GameStop and AMC. I mean, there were others, but those were like the two big ones. And I have to say, like, my heart was always a little bit more with the GameStop one. Really?

Yeah, absolutely. Because I always thought, like, well, there was at least like this sort of like, there was a thesis that had long preceded the boom. There was a catalyst with the stake held by Ryan Cohen, the Chooey Founder. AMC, it was just like a little too nihilistic for my taste. Well, now, first of all, Ryan Cohen came in kind of late, I would say, to, you know, after a lot of this had already happened. But I was always partial to AMC just because I really like going to the movies. I like that people were throwing money at it at a time when it wasn't really clear if it was going to survive.

Whereas GameStop, GameStop just seemed like another brick and mortar video game retailer. Right. But, okay, we're going to keep arguing about this. Yeah. But with GameStop, there was like a crew of people who, the AMC thing sort of came out. nowhere. So all through 2020, long before the spike in like January and February of 2021, there was a community of people putting together this idea that there was something that the market misunderstood GameStop. The market viewed this as a brick and mortar retailer in

terminal decline, an eventual zero. And at least there was some contingent of people who, A, thought it wasn't going to be that. And B, the whole sort of like short squeeze engineered on Wall Street bets was like a GameStop thesis originally. Like that the famous post was about there is an opportunity in GameStop specifically. I remember having this argument with you last year, which was, was it purely a technical squeeze or was there some sort of fundamental bull story embedded in GameStop? And I mean, I got to say, so obviously the share prices come down quite a lot since early 2021.

However, looking at it now, it's still above $100 per share. It's almost $130 per share compared to around like $15 when we started. So even if it was a technical squeeze, something has changed and someone in the market clearly sees more value there. So in summer of 2020, it was like a $5 stock. Then it rocketed to like 350, so a 70 bagger in a few months. It has come way down. But it's still at 126. So well ahead of where it was pre-squeeze.

So the question is like what's going on? Is there something real did it actually happen in what all happened at GameStop? Right. And how did the meme stock frenzy actually feed into that? Did it actually have a fundamental impact on the company, the health of the company itself? All right. So today, we're going to be revisiting GameStop and we are going to have a guest back who he had on early 2021 last time.

But also he was one of the true GameStop longs. He didn't just come in at the peak like, you know, he's not, isn't just apen to it. He had a thesis. He was a ball. He argued for many months that it was a misunderstood stock and he made a lot of money. And we're going to revisit the GameStop story. We're going to be speaking with Rod Olsman, who is the managing director of Wook Capital. And he's the co-founder of gmede.D.com, which sort of has long cataloged the long gamestop thesis. So, Rod, thank you so much for coming back on Oddlods. Thanks for having me back. A lot less stressful recording it today. then when we recorded it at the peak of the mania. Those were wild times because I think like we recorded an episode and news broke in the middle or like, you know, we were talking to you, right? We were talking to you and something happened in the middle of the conversation and it was

like it moved 50%. I don't remember what it was because that time was so crazy. But those were fun times. Those were right. I mean, it was stressful, but it was fun, right? Both, all of the above. Maybe just to begin with, you could give us, just remind us, like what, was it about GameStop that you thought was misunderstood before early 2021, before all of this

happened? Yeah, Tracy, I'll kind of rehash and summarize my experience with the company. So, Joe said months. It was years for me. I had begun accumulating a position in late 2017. Wow. I perceived the company as a value play at that point in time. I thought that there was plenty of opportunity for them to generate cash flow, both in the near term and through the next video game cycle, which was still a few years out at that point. I was very early. The stock, a lot happened from an activist perspective in the stock between 2018 and 2020. Tiger Management wrote the company a letter encouraging they do a strategic review. They ended up selling off their cell phone retail business that they had bought as that was their attention.

attempted means to diversify away from physical gaming. It was a poor decision, earned some capital that way. But regardless, they almost sold the company to Apollo or Sycamore, Bloomberg and Wall Street Journal reported in late 2018, early 2019. That fell through. They didn't sell the company. It was 16 bucks a share at the beginning of 2019. New management team comes in and they slash the dividend to zero. Long story short, by August of 2019, the stock has fallen down to about three bucks from 16. That's the time that I think a lot more people became aware of this idea that it's not just in terminal decline or at least there's enough opportunity at $3 per share to get a reasonable rate of return. Michael Burry wrote the board a letter. They had an authorization effectively

that they could repurchase 80% of the shares outstanding with their existing cash on hand. So like when people actually look at the balance sheet, it just didn't make any sense the way that the market was pricing it. I think it was some forced selling from when they slashed the dividend of zero, blah, blah, fast forward us into 2020. We all know that COVID then happened. And then we get to August of 2020 when Ryan Cohen files his first 13D, and that's when things just go into hyperdrive. And a lot happened between August of 2020 and January of 2021. But there, you know, there were points at which the company had a net cash position of five bucks a share on its balance sheet and it was trading at three bucks a share. So it's, you know, you had sell side analysts, putting a price target of a

$1.60, like stuff that just didn't make any sense to me at least. Clearly it made sense to some people. And then of course, you can't talk about it without discussing the fact that, you know, there was a very large short position in the stock that that was correct for many years, right? Melvin Capital is the most well known who initiated the short in 2014. Obviously, I'd love to talk about disclosure through this conversation a little bit, but we know that they were up 90% plus, but for whatever reason, they felt that their risk reward was worthwhile to keep the shore on even when the stock traded at a meaningful discount to net cash, and the rest is history. So you mentioned the analyst price targets there. And I mean, even now, a lot of people are

quite bearish on the stock. But what was the bearcase? here. What was it that people thought GameStop was getting wrong? Yeah. I think the simple bear case was that by virtue of being primarily a purveyor of physical video game software products and specifically used products to drive the bulk of their gross margin, as those profit streams evaporate, the bears would argue more quickly than I think the bulls. As that disappears, there's simply no way to replace that lost profit, and it will be structurally incapable of generating meaningful profits into the future. I do think that they missed what happened in 2019.

We talked about it last time that Ty Kim interviewed Mike Burry in 2019 talking about the fact that the Xbox Series X, the PlayStation 5 will have disc drives. And inherently, I think his perception, my perception, was they have at least one more cycle that they'll have. meaningful physical video game sales. And even as that pie continues to shrink for the physical portion, there's still an opportunity for them to generate meaningful free cash into late 2020s when the next video game cycle comes around. And who knows, right, if the next Xbox or PlayStation will have a disk drive. But in 2019, it was made clear that they would. I think bears felt like

consumer demand for digital would be far larger than physical. Though if you look at the production numbers and I think everything that I've seen reported is that the mix of physical, for example, PlayStation, it's, I've seen anywhere from 75 to 80% of the actual consoles are the physical console as opposed to the digital only console without a drive. So not that everyone buying those physical consoles only buys physical discs, but that optionality and there is real value there. You know, if you buy a game for 60 bucks and you decide, I don't love it, well, if you paid it for a digital download, you have no residual value, whereas you could otherwise sell it back,

traded in, have some economic value there. That's interesting. I hadn't thought about that. So in theory, like part of the turnaround plan, and we're going to get to like what Ryan Cohen and management have done over the last year and a half. But, you know, in theory, like part of the turnaround plan is, okay, they're going to get into NFTs and digital and be something more than a brick and mortar retailer. But the argument that you're making is that people just mistakenly assumed brick and mortar physical CDs were zero. And when you look at the, because of, you know, that's just what everyone assumes these days, but when you look at actual gamer behavior, what they're actually spending,

how they're spending, where they're buying, that was just a mistaken assumption. Is that a mistaken assumption still? Like, what is the value of just sort of the good old fashioned game stop, walk into a strip mall location and buy a disc? If you think about it on its face, why is there any value to buy it from them versus anyone else? And there isn't. That said, my experience and from my research, the experience of most consumers who engage with them is that, look, why is there any specialty retail, right? Why doesn't Amazon and Walmart and Target split the entire market? Well, in GameStop's case, the finding, or at least what the company reported, I think it was in 2019, one of the calls, they disclosed that physical game products or gaming products, they sold at a 2x attach rate to the big box retailers. generalists and accessories they sold at a 3x attach rate.

So in this era of direct to consumer, right? If you're a Sony or Microsoft, sure, you'd prefer to own the direct consumer relationship and sell without even giving any cut of the margin to the retailer. But in the case of GameStop from that distribution angle, they're the best distributor that the supplier could have to ask for. And I think that part of that was evidenced

by the Microsoft strategic, agreement that happened in October of 2020, wherein basically they indicated that there would be GameStop taking a cut of all incremental sales that occur on hardware sold from GameStop. So if GameStop sells you the Xbox Series X and you go and download games on it, GameStop's going to get some undisclosed small portion of those incremental sales. So that was a big thing to me, and I think a lot of other investors, because it implied, these distributors and suppliers see value in GameStop. Obviously, for the customer to see value, it needs to be a differentiated experience,

whether that's the customer service angle. If you walk into most GameStops, most of the employees in those stores are pretty hardcore video gamers. They may have a different niche employee by employee, but you get insight into different games that you might not have otherwise been familiar with, whereas you go to a Walmart and it's behind lock and key, you need to grab some random employees. if you want to get the game, they don't know anything about gaming. So, so that specialty experience, I think, is the differentiator and it was evidenced by their ability to drive

incremental attachment. So why don't we fast forward a little bit and talk about what's happened since then. And, you know, we talked about Ryan Cohen. He became chairman. I think it was late last year. Was that right? Something like that. Or maybe it was the summer. Okay. So he becomes chairman and he starts putting in place all these different ways to increase games. GameStop's business. And some of the stuff he's been doing, you know, things like starting an NFT marketplace, stuff like that, it seems a little bit different to the original GameStop mission or bread and butter business.

And I'm curious what you actually think of that. Like, you had a bowlcase based on GameStop being a video game retailer and thinking that it could grab a decent slice of the digital market or at least more of it and that there would still be demand for physical games and people would want to go into a store where the customer sales, people actually know video gaming and stuff like that. What do you think about these diversification efforts? And does that change the nature of the business in your view? So we put out in January the accumulated sum total of all myself and a cohort of other investors who were maniacally focused on this company for most of 2020, especially.

after Cohen became involved. We put out a report with a $169.42. $42.2 bullcase price target, which obviously was half meme, but was underpinned by real analysis. One of the pieces of analysis we got wrong was we perceived there was value for an advertising technology-oriented business. They have tens of millions of customers. They have access to reams of consumer data on gaming preferences.

And our view at the time was I had... begun seeing them integrate targeted advertisements on their web platform, I thought that was the angle they were going. And maybe it was the angle the prior management team was going. They haven't gone that angle, but I think at its core, the value is tapping into the fact that, look, I'm looking at the proxy statement. And what they say is that we have a unique opportunity to be a conduit between developers, publishers and consumers as gaming shifts from consoles to the Metaverse and other frontiers. And that was really the core of my view was that GameStop was that physical nexus of gaming and that they can play into digital and play into this shift and that they're not necessarily DOA. The direction Cohen went, Tracy, he had the settlement in early January of 2021 where it had looked like it was going to become a proxy fight. There had been previous proxy fights with the company over the preceding year, successful proxy campaign.

And so it looked like Cohen was going that route. There was instead of settlement, I think, because, you know, look, I collected 4% of shares outstanding and sent him a letter on behalf of those retail shareholders who those 4% of shares reflected and said, you have our support if it comes to this year's proxy fight. So I'm sure he had accumulated shares from others. You know, in the intro, Joe, you mentioned I now am at Wook Capital. and Wook Capital was specifically formed as a byproduct of really the core work that went into this crowdsourcing of the investment thesis. And John Kim, John's the CIO at Wook, the founder, John had owned 1% of GameStop and been the largest contributor to that 4%. John had the opportunity to meet with Ryan in December of 2020 and hear his vision. So I think that the people who really did the legwork understood this wasn't just some scheme that the guy cooked up out of the blue.

he had a vision. You know, clearly that I knew nothing about blockchain and crypto other than just what I read. I was not an active participant in the blockchain or crypto ecosystems. I had never bought any crypto until very recently. I've begun dappling an NFT. But that does seem logical, right? If it's creators, gamers are consuming this, it's a $41 billion addressable market. We can argue how sustainable that is.

it's very logical to me that they've gone that route as their digital growth strategy. And that's underpinned by them really doubling down on making their existing business better. They hadn't done any investment really into like digital systems, their website, their mobile app, e-fulfillment. They've made multiple E-fulfillment network investments over the last year. They've improved their service. If you think about Chewy, people know them for, you know, Chewy will send Pet Owners a happy birthday when it's the pet owner's birthday.

I'm seeing now GameStop doing a lot more of that customer engagement during interactions in the GMEDD Discord server. I see a lot of people sharing different examples of their own experience. So there's definitely been a change in the customer experience with that top-down view from Cohen. He became chairman in March, I believe it was. So the first reporting of anything NFT related was from GMEDD, and it was in April of 2021. So this is not stuff that they've just pulled out of the blue. they've been working on it for quite some time now. They've committed to bringing the marketplace to bear by the end of the fiscal second quarter,

so the end of July. So, you know, a lot's happening behind these scenes. And I think that people are so focused on just staring at the current financial statements, which, you know, the companies shifted its strategy. They're forsaking margin at the expense of regaining customers back into their ecosystem for long-term growth. And I think, you know, COVID happened. So our initial estimates were certainly impacted there.

digital is being adopted more quickly. It seems it'll remain to be seen if what happens as 2020 keeps rolling along and normalization keeps occurring. But there's a lot to unpack there. And we've done our best to try and be objective with it. Most of the people in GMEDD don't have a meaningful ownership stake in GameStop. It's just a passion project. And we just feel like it's been so misrepresented in media. It was so misrepresented in from the analyst angle for

so long that we were just doing our best to present what we thought was a mostly unbiased view. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real. Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your

clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio, all investing in subject to risk, Vanguard Marketing Corporation distributor. They say abs are made in the kitchen. Cool, but who has time for three hours of meal prep and a fridge full of Tupperware. That's why I started using Factor. Factor delivers fresh, never frozen, ready-to-eat meals that are dietitian designed for balanced science-back nutrition. No prep, no cleanup, just heat, eat, and move on. I've got gym days, work days, super long days, and Factor keeps me on track without slowing me down. It's real food, great flavor, and the kind of meals that actually support the work I'm putting in. We're talking

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won't last long. Go to FactorMeals. C.A. and use code Pro. That's 11 meals, free shipping, and free sides for life, but only with the code pro at factormeels.ca. Factor. Canada's number one, ready-to-eat meal delivery service. So I just want to like pivot just a little bit because you mentioned that some of the money that was in the original GameStop trade has become part of what capital, your current project.

you talked about, you know, there's still the gm eD.com Discord. And of course, these are some of the topics recently talked about them with Lily Frankis and Kyla Scanlan. But it's like this cohort of GameStop traders, like where are they now? I mean, you know, what's, roaring kidding? Well, where is everyone? And not just the big names like yourself and Keith Gill, but so many of the people who got excited about the trade.

Like, what's the distribution? How many of them are still trading? How many of them lost interest in the market? how many of them. Where's that crew now? I know. You'd love to get a really clean answer, but it really is all over the spectrum.

In terms of Keith Gill, I haven't had an opportunity to speak with him since January. Regrettably, I'm certain he's been facing his own share of legal reasons for which he hasn't. And look, I'll say it aloud, and I know I would be advised not to, but it was just about a year ago. I was subpoenaed from SEC.

pertaining to my involvement. It was this massively broad-based subpoena asking for everything I'd ever said to anyone about GameStop for more than 12 months of history. And when you think about, I literally, my life, my second job was researching GameStop. Yeah, it was a massive cost just to try and accumulate all of the documents. It ended up having to say, look, it would cost me hundreds of thousands of dollars to do what you're asking. You can go to the sources themselves, if you would like it. I did incur meaningful expense that breached six figures, which was more than my net worth before I entered the trade.

Thank goodness I made money. And I think that is a good example of where you see these politically motivated investigations that have, you know, I've been misdirected towards small, passionate investors who, in my opinion, didn't do anything wrong. I know that there are some people who had malintent, right? You could obviously point to the Wall Street bets folks. saying things like, yeah, squeeze the shorts. Well, obviously, that's not an investment thesis.

So with regard to Keith, I haven't spoken to him to Roaring Kitty to DFV, and I'm sure he's incurred expense comparable slash in excess of mine. But I know, you know, Michael Burry disclosed he was subpoenaed as well, which it's like why the guy got out of the trade in the fourth quarter. He wasn't involved. So, you know, it's like, what is SEC focusing on there? But let me, sorry, Tracy, go ahead. So, I mean, just to interrupt you.

So first of all, I hate paperwork. and, you know, something like that is my biggest nightmare. And so you have my utmost sympathy because I can only imagine what that's like. But secondly, you know, this is sort of tangentially related. But this week we saw Bill Wong, the Arkegos founder, charged with market manipulation. And there's a lot of talk in there about purposefully squeezing the stock higher. And some people saw parallels between that and GameStop. So I guess my, I'm just curious what you thought about that.

Does it seem like the SEC is cracking down on basically gamma squeezes? I'm not sure about that. Like, here's how I would characterize the things that are wrong with, with what happened with Archegos and with, say, Melvin capital. You have a lack of transparency in the market. It is unacceptable to me that Archegos was able to accumulate ownership or at least economic ownership stakes of more than 50% of discovery of Iquii of um gsx i think gsx whatever they're renamed now but the fact that he was able to accumulate those with with swaps you know that is clearly a

failing uh on the side of the disclosure rules for longs but i would counter that the fact that melvin capital had more than a third of game stop shares short and had no disclosure obligation obviously people parsed together with their puts that they disclosed would show up in their 13F. You know, the short shares were not shown up, which I've, I don't know for certain. I've come to the conclusion it was somewhere around 20 to 25 million shares plus the puts, which would be if you add those together, it's, you know, you're getting close to half the shares outstanding that Melvin Capital themselves were short. So on both ends of the spectrum, it's unacceptable that disclosure would be so limited that

people in the market don't understand that these massive multibillion dollar forces are pushing prices and impacting stocks. So I think that there's issues with that. And then there is an issue. It's unacceptable if there's a Discord chat, a Welfry Betts chat somewhere. Your thesis is that I can push a price as opposed to I see a fundamental reason for this business. And obviously the world of crypto is completely Wild West, where it's mostly just pump and dumps and rug pulls and scams like that. And I think that the conversation you all had with Matt and SBF the other day talking about the box, um, kind of, you know, highlights that.

But there's a lot that's wrong. And obviously I feel, uh, aggrieved about how I was, um, part of, you know, what SEC opted to investigate. And as far as I know, they've still not put any sort of report out or gone after anyone. I'm sure there could be something to come on that. hopefully they don't come back after me for saying this. But yes, it's unacceptable that people would try and manufacture price distortions on both the long and the short side.

And I think that is market manipulation. It feels, though, like, you know, it's one thing, okay, if you're a hedge fund, you have certain rules in place in theory about things, you know, requirements. Maybe there should be more requirements about what you have to disclose if you're short. but here's a regulated entity. A group of people, just to play, I don't know, devil's advocate or something. Like, I don't even know how you would conceptualize an equivalent for people meeting on a message board or people meeting on a Discord or in the comments of a Wall Street Betts post,

just sort of like organically becoming part of like a stock market flash mob that aims to implicitly push the stock in a dramatic direction just because everyone's sort of doing it all the same time. and I don't know, you know, maybe we'll never get back to quite the fever pitch of early 2021. But my assumption would be that these sort of like organic squeezes that just emerge, because that's how the internet is, are going to be with us for here to stay and a very difficult time to ever like come up with rules around that. Yeah, look, the reality is that the flows of money are what's going to drive the price in the short turn. And if there's massive flows of highly leveraged capital through short-dated calls,

that's going to have an outsize effect. And you're right, you know, one person on their own isn't going to move the price, but when it's dozens, hundreds, thousands, tens of thousands, that cumulative effect is clearly impactful. I saw a report discussing the January events and the timing of stimulus checks and the timing of, you know, all the new accounts being opened. And it does seem that what happened in January 21 is kind of the most extreme example of what you're getting at.

It's likely, in fact, one would expect it, and we keep observing it in various tickers since then, that this type of stuff is going to happen. But I think it's worth repeating that people should understand that if you're going on a message board and you're saying, you know, let's squeeze these guys, let's pump this price. Like, if you're intent is to manipulate the market,

just because you're a small fry, you shouldn't get a pass. And I don't think that's acceptable. But I do understand. I'm thinking back to what Lily and Kyle were talking about. Like there's this perception of a lot of those small fries that the game is so rigged against them that they almost have to, you know, break the rules themselves or go down that path. So there's definitely a lot of that distrust.

To me, it was a lot of taking all the Occupy Wall Street, but now Occupy Wall Street has a smartphone app and they can try and occupy Wall Street effectively. Well, also, I mean, to me it's a disconnect between the existing rules and technology as it stands, right? you are not allowed, say you're a hedge fund, you cannot send out a bunch of emails to your closest hedge fund contacts and say like, hey, let's all conspire to push up the stock of GameStop. And yet, because these message boards exist, everyone seems to think that that somehow makes it different if you do it at scale and you do it publicly. But I guess we'll find out, you know, from the SEC or whoever, whether or not that's the case.

but I wanted to ask you another sort of, I guess, depressing question or like a darker question, but you're right. There was this sort of sense about the game being rigged and part of the GameStop appeal to some people seem to be this idea of getting back at the big institutions, whether it's Wall Street banks and hedge funds or something else. And it almost felt like people went, you know, really went over to the dark side. There are some people who seem to think that all of Wall Street revolved around the shares of, you know, a video game retailer. And then if they could just like, if they could just squeeze it higher, then the whole edifice would come crashing down.

But why do you think it was such a lightning rod for those types of people? And has that, that sense persisted? So it gets back to Joe's question about where is everybody. And it is a wide spectrum answer. I, I, it's irrefutable. I heard, I think it was Lily referred to kind of. some of these cult-like mentality, and cult-like social platform.

And some of them are quite like that. I'm not going to use the name of the one that comes to my mind, most clearly, but there's tens of thousands of people that on a daily basis are in this platform. And it's very much a view that these people are deeply convicted. They believe that the short sellers never closed in January of 2021. There was some nefarious scheme between the market makers. other stock oh no no i mean i mean because i mean oh i thought you're talking because i'm not you know

without incurring the wrath of the uh the internet i feel like the people who are really into the other stock were like like you guys except turn to a left no but but there are people into game stop who are just as bad and in so far that they are purely believing that by throwing their their hard-earned into this equity, which for them, it's more like a trading token. They don't. They look at price. Many of these investors, speculators, traders, whatever we want to call them, apes, these people, by and large, are very new to the market.

They don't have a deep understanding of how things work. They often just look at price. They look at a stock chart. It's very much limited amount of analysis. It's hearing and seeing what the people with the largest social media followings are talking about and then saying, well, they must be right and let me get on this. And I see so many people talking about this and saying there's this evil scheme by these, these people on the short side of the trade that it must be true.

So you got like that end of the spectrum. But on the end of the spectrum, you have a lot of people who experienced this GameStop investment. I think about my partner with GMED, Joe, he was a young guy in his early 20s who made, you know, low six figure some. He, but he sold out of the position. As I mentioned, he's continued to maintain the analysis of GameStop. He and many others like him are continuing to learn about markets, learn about how you actually analyze investments. So like you have the bad of the cultists and you have the good of new market participants who are learning.

And like that's one of the things we're really looking to foster with what capital is we believe that social research, crowd sourcing of research. Like the fact that you can have millions of eyeballs looking at different pieces of information and bringing unique expertise to bear, you can uncover nuanced and differentiated perspectives and theses in that manner as opposed to just we're going to mess with the shorts. So there's this wide spectrum. There's clearly a ton of new participants. I think like Lily and Kyla were saying, it's it's come down, of course, from January 21. But I do think it is durable. And I think it is different from like the 2020. you know, the 2000 era message boards, it's even more so than that was. And I think it will remain

durable. Can you just describe what capital? Is it a hedge fund? Is it, and what is, you have several stocks. Just describe a little bit more of what this vehicle is. Yeah, we, we just started up. So, so John had mentioned, John and I had worked, John had been one of the investors who were, we had this, this cohort of GameStop investors, you know, lawyers, oil and, and gas people, just other random retail investors, like across the entire spectrum of people who, people who were tuning into the roaring kitty chats, you know, from August of 20 onward. We kind of formed a group in Reddit where we were just talking about trying to analyze all the things coming out. We eventually made a discord and we called ourselves the hedgehog fund,

you know, jokingly. But all of these, like, the fact that we experienced and lived this where we were able to develop a much more robust and informed and detailed thesis through all of these various differentiated perspectives. That's informed the view that John had, which is that you can repeat this at scale over time. And by this, I mean identifying mispriced, misunderstood market opportunities in equity markets. So our view with Wook, Wook is a private investment fund. We have nine figures of investable assets that we are not looking for anybody's money. We're not selling anybody a product or service. What we're selling is we are going to build a community to really look to scale what we experienced with the whole second half of 2020 GameStop, where you can bring in investors,

retail investors from across the spectrum, people who have passion, who have creativity, who have this enthusiastic transparency and willingness to share their information with others. like what we did, right? We, we had, I had nothing to gain from talking and sharing that, you know, I had to crude all these order numbers and I was crowdsourcing these order numbers and had located, you know, that you can understand what the company's e-commerce results were going to look like, et cetera, et cetera. So it's, it's taking that and taking that novel idea that you can crowdsource research and realize alpha as a, as kind of a community aspect. Now, it's not like we're saying that you, you know, you need to pay us to be part of this.

but we're still nascent and thinking it out more. But that, in essence, is what we're looking to build and replicate. They say abs are made in the kitchen. Cool, but who has time for three hours of meal prep and a fridge full of Tupperware? That's why I started using Factor. Factor delivers fresh, never frozen, ready to eat meals that are dietitian designed for balanced science-back nutrition. No prep, no cleanup.

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Whichever two-year term plan you choose, the price is guaranteed for two years. Fast internet? Long ad. so worth it. Visit bell.ca for more details and to check availability. Bell, connection is everything. So can I just ask, so you went long game stop because you had a very specific interest in the company from what I remember. And now, based on that experience, you're doing due diligence on other stocks and sort of, I guess exercising what you've learned from the game stop experience in a broader way. What sort of stocks are you looking at? And what's the difference between?

you know, coming up with a investment thesis for GameStop, a business that you know intimately, you're a video gamer, you understand that whole thing versus looking at something else. Well, I think that's it. You should have a more informed view than the market. And this is not a position that Wook has, but I'll talk about a position I have personally, Allison Transmission, right? I worked in the industry at Ryder, Transportation Logistics Company for five years. And this, you know, we've obviously observed this EV bubble that I think we're still living in, where everyone expects that EV from both personal vehicles, commercial vehicles, all sorts of transportation equipment will rapidly electrify and the legacy OEMs or suppliers are all out to pasture.

But in the case of, say, Allison transmission, they make automatic transmissions for commercial vehicles. And I've done extensive research and lived extensively in my prior role at the company of talking to OEMs, understanding their build plans, understanding what the opportunity is for them to shift to EV, understanding that fleets aren't likely going to be buying from no-name startups. They're much more likely to go with the trusted freight liners, internationals, Mac, Peterbilt, Kenworth, et cetera, of the world. To me, I think Allison is a good example where when you look at it, it's trading out its lowest to multiple in its history. The company was part of General Motors in 2007. It was sold to private equity. It became public in 2012.

And since 2012, the company on a forward earnings basis, you know, EV to EBIT has never been cheaper because you have this massive storm cloud of, oh, no, EVV is coming. But then when you actually look at and you talk to the experts in the space, you know, yes, there's some government regulation in like 20. 2027, 24, 2031, not to get too detailed, but I guess it's unique, like Howard Marks has said in the past, you need to have a different view. If you want to outperform the index or the market, you need to have a different view and you need to be more right. And I think Allison is an example where I have a different view toward electrification adoption and hopefully it'll be right. Just on Allison, I'm curious that you have personal expertise in a company like that. But then the platform itself is like a crowdsourced research platform.

So do you, would you go out and solicit other information from people on that company? Or is it more that you share your own insights with others? It's absolutely more so the former. Because I may know a few things about a few things, but I'm my no means expert in everything. I'm very, very little of an expert in anything. But it's trying to make it such that people see value in participating in this community. community, bringing their own expertise to bear. We have kicked off earlier this month. We kicked off a series. It was ironic. We recorded it the Friday before the news came out

of Elon Musk getting involved with Twitter. I had a friend of mine who's an AGC at a public company who had spent time on both the activist side and also on the corporate side defending activists. We had a robust discussion on shareholder activism. And our hope is to have, you know, different programming where, look, again, we're not trying to sell you anything. Our view is if you see value in participating in this community, you will be willing to share your own insights, knowledge base. No one is going to be an expert on everything. Some people who have differentiated views from their lived experiences, such that, yeah, hopefully we can cover a wide spectrum of industries, of sectors of companies, and uncover some of these misunderstood and mispriced investments. And it would mostly be driven by the expertise of the crowd and the insights of the many.

Some people are going to have more insights than others, of course. But it's not going to be like Rod knows all this stuff about everything because that's not the case. I think it sounds really cool in your description, obviously, of Allison specifically, again, taking an assumption that everyone has, oh, these businesses are zeros and questioning that. Obviously, the parallels to GameStop are clear. We just have a couple more minutes. So I just want to ask you real quickly, GameStop, like, what's the next thing to watch? Like, when do we see? what should people look for to say, okay, the strategic efforts that are being made are turning

this into a better business? So the company's told us, and I'll rely on the company's direction, that we should be looking more at the top line, which when you look at their last quarterly result, they really forsook, you know, they forsook gross margin meaningfully. It was in the high teens. So what I believe they are doing, and they've said this since Cohen became chairman, is that they are long-term focused. And what that means is in the short term, they need to bring customers back into the ecosystem. They need to regain customer trust. And I believe their goal, like with Chewy, will be that whereas the desire with Chewy is that that's the ultimate destination for pets, GameStop will be the ultimate destination for gamers. They've expanded

product categories across accessories, PC, hardware, and componentry. These are, you know, in of themselves not going to be a game changer. I do think the big question mark and the big perspective upside scenario is what happens with this NFT marketplace, their forays into blockchain. As I noted, we've been following them for a long time. And they've been working on this for more than a year. The marketplace will be launching within the next, it's going to be May soon. So before the end of July.

So I would look closely at what the reception. is to this marketplace. We've all seen, I'm sure, negative commentary from, you know, Ubisoft launched NFTs and gamers hated it. Blizzard has been talking about it and gamers hate it. But I think it's because gamers perceive NFT as as loot box 2.0 where you're going to pay for something and it's just the company milking you out of things. I do think that it's more oriented on there are creators like we've seen some of the stills where it's some of the artists who worked on some of the most well-known games of our time, putting out different digital artwork that could be digital collectibles.

The company does have a thriving collectibles business. So it does make sense that digital collectibles will dovetail with physical collectibles and physical gaming. I think there's obviously a lot of question marks around the durability of crypto gaming and blockchain gaming, right, Axi infinity. It's like, is it just a big Ponzi? So I think it's fair to be uncertain about what that looks like, But it's irrefutable that it's a rapidly growing market. There's a ton of capital going into the space and that it is a real opportunity. That, though, to me, is the bullcase from here, right?

We're a $10 billion-ish market cap. So your core business isn't going to be enough to justify that, in my view. You need there to be free cash flow dollars flowing in from this high margin digital business that they're building. And it remains to be seen, but I'm going to be watching that closely over the next few months as they launched the NFT platform. All right. Well, Rod, we got to leave it there, but it was so great to catch up with you. Always really interesting and I appreciate you coming back on Oddlock. Thank you for having me. Absolutely.

Rod is so great. I really enjoy him. It seems like a genuinely, I think it's a good person. It's messed up that he had to spend six figures to collect paperwork when, I don't know, unless we're missing something, it's like, it's not. Yeah, it doesn't seem like the guy who came up with like a fundamentals based by case on game. stop was like the one. He's the one who has to take. Anyway, setting that aside and it absolutely sounds like a nightmare.

It does feel like, and this is something that came up with Kyla and Lily as well, it does feel like something's changing here, like some sort of disruption in the way research and, I guess, investment communication actually works, if that makes sense. Oh, yeah, for sure. Like this is, and the idea of like crowdsourcing or distributed research to find like, genuinely novel ideas. Like I love Twitter. I love finance Twitter, but you know,

it can get trapped at times into these sort of like group think where it's like everyone's all into like cloud and tech stocks. And then that turns and everyone hates cloud and tech stocks and all that stuff. And so actually like examining individual companies and saying, you know what, here's the thing that a lot of people believe and it may be wrong. Yeah.

It seems like a high potential for the internet to come together on stuff like that. Or just being able to stress test a thesis, which is something that sells, analysts at large banks, I don't think they really get a chance to do it. They can do it internally, but it's not like they can publish a note externally and then ask everyone, like, well, what do you think about it? Well, you know, they have those like ideas dinners, right? And so it's like people throw out stuff and they probably argue, but why can't the public have like something kind of something equivalent. Anyway, it was great. Yeah, it's a fun chat. All right. Shall we leave it there?

Let's leave it there. This has been another episode of the Odd Thoughts podcast. I'm Tracy Allaway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthal. You can follow me on Twitter at the stalwart. Follow our guest, Rod Alsman. He's at Rod Olsman. Follow our producer, Carmen Rodriguez, at Carmen Armin. Follow the Bloomberg head of podcast, Francesca Levy at Francesca Today. And check out all of our podcasts at Bloomberg onto the handle at podcasts. Thanks for listening.