GameStop is in the news. Apparently, people on Reddit engineered a short-squeeze which cost the hedge funds that were shorting the stock millions. While the squeeze appears to be a case of retail investors fighthing against Wall Street. I want to emphasize that GameStop is not a Cinderella company. The corporation called GameStop was created by Wall Street as a vehicle for rolling up the gaming market.
Wikipedia traces this history of GameStop to a Texas based chain of software stores called Babbage's. This chain was named in honor of the English inventer Charles Babbage (1791 – 1871) who many credit as being the inventor of the digital computer.
I've been tracing merger chains for the last few years.
Companies like to present their history in the most prestigious light possible. For example, Barnes & Noble used to claim that the firm was founded in 1873. This was that the date that William Barnes' father Charles started a publishing firm. William sold his interest in his father's firm to buy a stake in a bookstore called "Hinds and Noble." The founding of the bookstore took place in 1886.
The founding family of "Barnes & Noble" passed away. The company had only a single store in 1971 and was owned by a conglomerate called "Amtel."
An ambitious investor named Leonard Riggio bought the firm in 1971 with the aim of creating a chain of discount book stores. The expansion hit the big time when Riggio bought a chain called B
Bruce Dayton, who was a member of the family that owned Dayton Department Stores, had created a chain of book stores called B. Daltons in 1983.
"B. Dalton" was created by Bruce Dayton of Dayton Stores. The Dayton chain included things like Marshall Fields and a chain of discount stores called Target. The family had big money. They engaged in the strategy of dominating markets.
Bruce Dayton changed the third letter in his last name from a "Y" to an "L."
Why did Dayton change this letter? My guess is changed the letter for the "L" of it. (I am so funny).
The stores expanded rapidly with the network of malls built at the time. The chain had 798 stores when Barnes & Noble acquired the chain from Dayton Hudson.
When companies merge they often combine the investments of the firms. So I don't know how much Dayton-Hudson money was kept by the merged firm. This merger set Barnes & Noble on the path to becoming the largest bookstore.
Some software publishers sought to sell through bookstores. This was troublesome for bookstores lacked the skill set to support software sales.
In 1984, B Dalton created a subsidiary called "Software Etc." This was at first an in store brand. It soon became stand alone stores.
Software Etc spun off as separate chain. Vendex International (which was a huge firm in The Netherlands that was started by Vroom and Dreesmann) was the primary investor.
Babbage's was created in 1983. It had an IPO in 1992. Software Etc and Babbages merged in 1996. The holding company took the name NeoStar.
NeoStar declared bankruptcy in 1996 and was prepared to close the doors of all of its shops.
Leonard Riggio stepped in and re-aquired NeoStar in 1997.
This "Babbage's Etc" company was re-integrated with Barnes & Noble in 1997. Gaming dominated the retail software business. The company created the brand GameStop.
Barnes and Noble launched GameStop as a chain in 1999.
In 2000 Barnes and Noble acquired a chain called Funco which had 400 Funcoland video stores. They made Babbage's Etc a subsidiary of Funco then changed the name of Funco to GameStop. In 2001 they held an IPO for GameStop.
In examining this merger chain, it is clear that the primary drivers of GameStop were Leonard Riggio and Dayton-Hudson (the makers of Target).
When company's merge, they aquire assets, employees and attributes of the other firms.
But, I believe that it is clear that finacial structure called GameStop was created by big business with the intent of dominating the gaming market.
While I am tickled by the GameStop short squeeze. I do not see GameStop itself as a chain worth preserve.
After these early mergers both Barnes and Noble set forth on a path that said one must dominate or perish. BN grew to dominate the local book market. GameStop engaged in aggressive mergers that built an empire with over 5,500 stores.
If you look at your local community, you are likely to find small stores owned by local game, comic and hobby enthusiasts that buy and sell video games. These firms tend to be more active in the local community than the Wall Street firms which seek to dominate the local market.
My picture is an image of a Barnes & Noble Store in Utah. I am writing up both the merger chain of Barnes & Noble and GameStop. I will make major updates on these pages in the next few hours.
I appreciate comments about this merger chain.
