At the same time, GameStop took a big bet on an expensive new business: Spring Mobile. Then, it doubled down on that bet.

Katie Canales/Business Insider

In 2013, GameStop embarked on a new initiative: smartphone stores.

"They just kept buying chains, and they were paying top dollar," Pachter said. "And then the earnings went down as soon as they bought them."

First, there was Spring Mobile, followed by the purchase of hundreds of storefronts from AT&T. By 2016, GameStop owned and operated just shy of 1,500 mobile-phone stores under the Spring Mobile name.

Those stores were expected to generate about $1 million apiece. And when they didn't generate that kind of money, they quickly became an expensive liability.

"It turned into a complete disaster," Pachter said. "These stores were going to do a million apiece. So with 1,500 stores you're looking for $1.5 billion in revenue and double-digit margins. So $150, $200 million profit, and I think they got to $80 [million]. They were just never even close."

Before the acquisitions, GameStop had cash in the bank and zero debt. By 2018, when Spring Mobile was sold for $700 million, the company was swimming in debt.

"I estimate they spent about $1.5 billion buying all these stores — $700 million in cash and $800 million in debt — and ended up selling for $700 million," Pachter said.

The company "went from no debt and generating about $400 million in cash, to $800 million in debt and generating $300 million in cash," he said.