With 20% Of GameStop’s Market Cap Now Composed of Its Cash Holdings, the Meme Stock Is Fast Becoming a Picture of Financial Discipline

How can other meme stocks learn from GameStop’s commitment to sound financial management?

Investment banks and stock traders everywhere have been in collective shock this month as video game retailer GameStop has become the new posterchild for the U.S. stock market. What started as a heavily shorted meme stock has now spun out into a rally unlike anything seen before in the stock market, with GameStop shares climbing more than 1000% in less than a month.

The surge in the company’s share price has brought its market capitalization to more than $22 billion, and the company’s cash holdings have risen to record levels as well. According to reports, more than 20% of the company’s total market cap is now comprised of cash, suggesting that the company could buy back a significant amount of its stock if desired.

The drastic influx of cash has been bolstered by the company’s decision to raise $500 million in convertible debt, as well as an additional $216 million from a private share sale to companies affiliated with Silver Lake Partners. This influx of cash can be used to shore up the retailer’s balance sheet and invest in growth opportunities for the firm, bringing the company into a new age.

Despite the volatility, the company appears to be banking on a long-term approach to growth and profitability, representing a much-needed sense of discipline in the company’s financial decisions. With the stock up more than 1100%, the company is certainly not looking to cash out, but looks to be focusing on long-term investments, as well as finding new streams of revenue to stay competitive and grow.

It is this long-term focus and financial discipline that has investors hoping the rally will last, as it shows that GameStop is using the newfound wealth to pitch itself as an asset and more than just a meme stock. Time will tell if the rally will continue, but it appears that the company is on the right path to becoming a serious contender in the stock market.