GameStop shares have been on a wild ride in recent days, mostly upward:

Much of this is driven by a new turnaround plan by GameStop board member and Chewy founder Ryan Cohen, who aims to turn GameStop into an online-first retailer. But if this is such a game changer for the company, why isn’t this reflected in its bonds?

GameStop owes a lot of money to a lot of people, and they don’t seem to be any more confident about getting it back than they were months ago:

GameStop’s two-year bond, on the other hand, tells an interesting story — one that strikes a much more cautious tone about the likelihood that Chewy Inc. founder and activist investor Ryan Cohen can revitalize the video-game retailer through a digital transformation. For all the whipsawing of the company’s stock price over the past two months, its debt has been relatively stoic, suggesting a rocket-ship-like turnaround is still anything but certain. The bonds last traded on March 5 at 103.5 cents on the dollar to yield 6.34%, or about 620 basis points above comparable Treasuries. That price is actually a bit lower than it was on Jan. 13, when the stock was still trading at about $30 a share.

If GameStop had truly turned a corner, why wouldn’t the price of the bonds go up along with the stock? A stronger company means higher likelihood of repayment, and hence higher bond prices.

My theory: retail traders on Robinhood are buying stock and stock options, not bonds. The bond buyers are institutional investors with a more sober outlook.

So, if you want to know the true picture at GameStop, I suggest looking beyond the stock and options to the bonds. If those start to move, something may really be changing at GameStop.

For more on GameStop and other meme stocks, check out these posts:

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Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

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