Today it was reported that Gamestop (GME) is in talks with private equity firms about a potential buyout: https://www.cnbc.com/2018/06/18/retailer-gamestop-is-in-talks-with-buyout-firms-sources-say.html With the news the speculation is what would the buyout price be if agreed upon? In this article I will give my prediction on how you can make money from the potential GME buyout. I am currently long Gamestop. This has been one of the trades I have been in on due to their price fitting my trading style. I look for a depressed stock with a good dividend.
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Gamestop’s Chart
As you can see price broke the trend line which is the magenta line and continued down lower. Price has not retraced to around the 50% Fib extension yet which is why I have been in the trade. The lower it went the more I slowly added on. Now with the buyout talks there is a chance for price to jump a great deal. Either way I am in it long.
Based upon the way I look at the charts I think that the buyout will be either:
The Buyout Will Be For:
The buyout for Gamestop will be either for $26 or $30. Here is why:
The bottom of the 38% Fib retracement level is around $26 and the top of the %50 Fib retracement is around $30. I predict the buyout will be for one of those two prices.
If the buyout is for around $30 then the long move is over and I am completely out of the trade. You can see from my Fib retracement drawing how the price falls in line. Even if you are not in GME yet you still have plenty of time. It is off of the lows from around $12 but it still has HUGE movement potential to the upside. So if the buyout happens I predict it will be for either $26 or $30 per share.
As you can see you still have plenty of time to get in IF you think the buyout will happen.
What If the Buyout Does Not Happen?
Now they buyout may not happen, we won’t know until we are told. There has been an increasing spike of volume the past couple of weeks once price hit the $12 level so someone was doing some major purchasing.
Even if the buyout doesn’t happen I am still in it. Based upon my trading style I feel that this stock has room to almost double from the current prices. I am currently long Gamestop and see very big growth potential.
People keep on trying to say it is another Blockbuster but it isn’t. I grew up with Blockbuster and they didn’t know how to adapt with the times. Gamestop has a TON more going for it than Blockbuster ever did. If I was looking to get into the video game sales market and wanted a beaten up stock price then GME fits the bill perfectly.
Whoever buys Gamestop (if it happens) is going to get it at a very attractive price! I don’t follow the fundamentals too closely because my trading is pretty much all technical but from what I have read the company is still in decent shape with their cash flow.
