Overview

Ryan Cohen has been tweeting about Trump in a very provocative manner lately and aside from a particular gentleman of the Germanic “simple guy” variety over on SuperStonk, nobody has discussed the possible motivation behind the tweets in earnest, which is extremely counterproductive. While politics is apparently an incendiary term, it is also an inescapable truth for any corporation: you must pivot your business to the politics and policy of the current administration. My thesis involves two overarching points: corporate taxes, and cryptocurrency/NFTs.

Exhibit A: Kitchen Cooked Chips

The point I'm going to make for how policy affects GameStop can be no better illustrated than by a little-known potato chip company called Kitchen Cooked Chips from Farmington, IL. My fiance indicated to me that these used to be the best damn chips in town, and upon visiting Illinois, we tried to find some to no avail, initially. Upon doing some digging why the chips were so difficult to find, we discovered the bad news, and the worse news. The bad news was that they were bought by Utz in 2019, and that the original factory in Illinois had been shut down as a result. The worse news was the large amount of folks voicing their concerns on the company's Facebook that the chip had gone downhill in quality and no longer tasted like it used to be. This video posted by Kitchen Cooked's VP Paul Blackhurst actually wound up explaining what happened to the chip: in summary, he explained that the FDA in 2015 banned trans fats and that this moratorium required that by June 2018, all companies including Kitchen Cooked were to remove all trans fats from their ingredients. As a result, the company changed their formulation, but many customers noticed the difference, and I assume this lead to a decline in sales. Later, in 2023, they changed the formulation again, and this one it seems is as close as it gets to the old one.

To summarize this example, in 2015 the FDA banned trans fats, by 2018 the company changed their recipe, their customers didn't like the new flavor, and this is speculation, but I assume that sales got so bad that by 2019, they were forced to sell the company to Utz just to stay alive. I'm not here to discuss whether or not trans fats are good, but that Kitchen Cooked is a poster child for how government policy can literally sink or swim an entire business, regardkess of what the customers think about the company and the product.

Exhibit B: A Series of Provocative Tweets & the GameStop connection

Beginning July 13th after the attempt on 45's life, Ryan Cohen tweeted 45's name no less than five times. I'm sure he's well aware of his position as CEO and representative of GameStop, and that these tweets may be upsetting to some. To quote RK, unless Ryan is a “dummy”, then he must have a very good reason for doing so, and that he weighed his options whether or not to involve politics in the overarching GameStop saga. I posit that Trump becoming 47th president would be hugely beneficial both to GameStop, as well as its investors, and for that reason, RC's tweets have to be examined.

Corporate Taxes

I'm not an expert on corporate finance, but I do know that Trump slashed the corporate tax rate from 37% to 21%. While that may not have been of much impact to GameStop when they were unprofitable and had what I assume was no taxable income, the future for GameStop is very different. If we are to assume that the profitability of GameStop is to increase, then so too does their tax burden. By 2025, these tax cuts, unless renewed, will expire. For the 2023 fiscal year, GameStop posted a profitability of $6.7M for the first time in years. I'm not going pretend that I understand how effective tax rates work, especially because of page 20 of GameStop's annual report that says that while they made $13.1M in pre-tax revenue, that they took a 48.8% tax hit of $6.4M leaving them with a $6.7M net profit.

Let's assume the world is simple, and that the 21% corporate tax rate is baked into that, and that the remaining 27.8% tax burden remains constant. If things stay as they are, and using GameStop's 2023 fiscal results, the profit remains $6.7M. If the corporate tax cuts lapse and go to 37%, then the profit reduces to $4.604M, a 31.2% reduction. If 45 goes through with his promise to not only keep the corporate tax cuts but further reduce them to 15%, then the profit increases by 11.7% to $7.486M. Imagine the company increases their revenue a hundred fold – a simple change in policy and administration is the difference between $748M in profits versus being as low as $460M in profits. An extra $288M (+63%!) sounds like a pretty good deal to me, and that's just taxes alone. I just posited a hypothetical scenario where their profits increase by a hundred fold – could that happen through policy as well?

You're Damn Right it Can! Enter NFTs

Earlier in the year, GameStop shut down their NFT marketplace, and two months later in April, issued the following statement upon their removal of the GameStop Wallet app: “Due to the regulatory uncertainty of the crypto space, GameStop has decided to remove access to its iOS and Chrome Extension wallets from the market on April 12, 2024.”

GameStop's cessation of involvement in crypto/NFTs was disappointing to say the least, because I was looking forward to a particular theory that GameStop could become a massive competitor in the digital space by allowing video games and other digital assets to be traded via NFTs. This would have been a a very beneficial departure from the current practice of not having any ownership over your any of your games – specifically, should Steam ever shut down, you'll be left with nothing to show for it, and you cannot trade or sell any of your games. In other words, the video games you buy off of Steam have no inherent value beyond the initial purchase, which is grotesque. In 2023 alone, digital game sales were a $174 billion dollar market, so you can see how tapping into even a fraction of that market could net GameStop billions of dollars.

I'm speculating somewhat, but it appears that Gary Gensler has been quite hostile towards cryptocurrency, launching lawsuit after lawsuit against companies in that market space, which I assume led to GameStop dropping or suspending the NFT project altogether.

Tying this all back to provocative tweets, Trump, while speaking at the Bitcoin 2024 Conference, has unequivocally stated that he would fire Gary Gensler on day one, create a “Bitcoin reserve”, and “hire people who love crypto”. If true, this pivot could enable the US to solve the “regulatory uncertainty” GameStop had a problem with, and enable them to continue with what was assumed to be a potential market disruption.

Summary

Corporate policy is driven directly by the politics of an administration, which decides entire company's fates – whether they survive, what tech they can roll out, what they can or cannot sell, even down to how much money they have to pay their employees and shareholders. I don't think it's a stretch to say that Ryan Cohen's outward display of support for Trump is indicative of his belief that an administration under Trump would be beneficial to GameStop as a company, and thus it is in the shareholder's best interests to telegraph that strategy.

TA;DR: I believe Ryan Cohen isn't just “trolling” but he's making it very clear which administration, from a policy perspective, would create a better business environment for GameStop. Trump represents a favorable corporate tax policy has the power to net GameStop an additional 63% to their net profits no matter if they're making $1M or $100B, and that favorable crypto regulation under 45 could signal not only the return of the NFT marketplace, but allow them to fully implement the theorized NFT video game ownership, which would allow GameStop to tap into a $174 billion market. Fundamentally, this is precisely the catalyst that turns GameStop into a juggernaut, and drives shareholder value to the Moon.