By the looks of it, GameStop (GME) is still at the top of the world. On Tuesday, shares climbed by more than 30% in a single session and stock is up 65.69% in the past five days.
The success of the popular video game retailer set off what now, in investing, is known as meme stock mania. In late 2020 and early 2021, fans of companies like GameStop and movie theater chain AMC (AMC) started promoting it on Reddit forums like w/WallStreetBets and r/Superstonk and, in a snowballing effect, shares soared to highs unjustified by either company's earnings.
At its highest, GameStop stock was up more than 1,000% at $325.
While shares have ebbed and flowed since then, the video game retailer is still up nearly 600% since the start of 2020. But a corporate consulting firm known as Boston Consulting Group is now claiming that GameStop has not paid around $30 million in fees for its role in "setting the company on a more sustainable path."
What's This Lawsuit About?
In a lawsuit filed in the U.S. District Court for the District of Delaware, BCG claims that GameStop came to the firm for advice on how to get out of a sales slump back in 2019. The firm then goes on to say that, even though "tens of thousands of hours" were spent on giving GameStop guidance, the video game retailer then turned around and did not pay the $30 million or so in consulting fees that had accrued over that time.
"Realizing that the company was in need of significant help, GameStop engaged BCG in 2019 to evaluate its operations and develop solutions that would enable a corporate transformation to ensure its continued viability," the lawsuit reads.
What Is GameStop Saying About It?
The lawsuit does not mention BCG's connection to the 2021 "meme mania" frenzy or the heavy shorting that sent GameStop stock soaring. Selling shares at that time helped GameStop raise over $1 billion in funds.
In a statement given to the Financial Times, GameStop said that BCG had a "seemingly meagre impact" on its financial success.
"We do not believe it is in our stockholders' best interests to pay the tens of millions of dollars sought by BCG, especially given their seemingly meagre impact on the company’s bottom line," GameStop said. "We will fight this suit and are proud that GameStop no longer utilises the likes of BCG for any services."
