Shares of Esports Entertainment Group Inc. soared Thursday toward a more than three-year high, after Citron Research said GameStop Corp. should buy the online gambling company to provide customers two things they love: videogames and gambling.
Citron’s call marks a change in tactic from its editor, Andrew Left, a widely known short seller who had previously been bearish on GameStop /zigman2/quotes/203755179/composite GME +13.33% . In January, Citron said it would stop publishing short-selling research , after Left said his social-media accounts were hacked and his children were threatened by angry GameStop investors.
At that time, Citron said it would focus on “long-side multibagger opportunities” for individual investors.
“What we learn from the past 4 months in GME are 2 easy takeaways: People love video games and people love to gamble,” Citron said in a research note . “So now, in order for GME to … maintain a high share price … they must change their narrative NOW.”
GameStop shares were back in vogue , shooting up 57.0% in morning trading, after skyrocketing 103.9% on Wednesday. Prior to the rally, the stock had closed Tuesday at $44.97, or 87.1% below its Jan. 27 record close of $347.51.
“There is one way for [GameStop] to seamlessly both pivot away from its secularly declining retail business and monetize its customer database, and that answer is to acquire Esports Entertainment Group.”
Esports Entertainment shares /zigman2/quotes/208107430/composite GMBL -4.72% hiked up 18.9% in active morning trading toward the first close above the $20 mark since November 2017. Trading volume was 15.2 million shares, compared with the full-day average of about 1.7 million shares over the past 30 days.
Esports’ market capitalization was $362.4 million, compared with GameStop’s market cap of $10.04 billion.
Citron placed a $50 price target on Esports Entertainment’s stock, or 139.1% above current levels, which some might call a multibagger opportunity.
Instead of selling low-margin hardware and games, Citron said GameStop should leverage its customer base to become the software and betting platform “for their gamers to compete in and bet on eSports.”
Esports Entertainment’s stock has run up 413.8% over the past three months, while GameStop shares have climbed 876.3% and the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.23% has advanced 5.9%.