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GameStop’s stock price tumbled Monday as Reddit’s favorite retailer announced plans to sell up to $1 billion worth of shares while touting increased sales.
The beloved meme stock plunged nearly 11 percent to $170.56 in early trading after it revealed the planned share sale, which will raise money for the video-game chain’s transformation into an e-commerce business.
GameStop said it would sell as many as 3.5 million shares in a so-called at-the-market offering that could grow to be 10 times larger than the $100 million sale for which it filed paperwork in December.
That many shares were worth about $670 million at Thursday’s closing price of $191.45. But GameStop doesn’t have to sell the stock at that price because it’s allowed to sell the shares over a long period of time.
GameStop signaled plans for a share sale to fund its digital transformation — which will be led by board member and Chewy.com founder Ryan Cohen — during the late March earnings report that was highly anticipated by rookie investors on Reddit’s WallStreetBets forum who pumped up the company’s share price in January.
The WallStreetBets crowd welcomed the talk that GameStop was planning to sell shares even though the announcement didn’t appear to sway Wall Street.
“They’ve done this so that they can sell those shares at what they see as the peak,” a Redditor named Teach_Consistent wrote in a Monday morning comment. “They know what’s coming and they’re moving themselves into a position they can benefit too.”
Cinema chain AMC Entertainment and other firms that benefitted from the retail investor revolt were able to sell shares while the rally was in full swing, but regulatory concerns prevented GameStop from doing so at the time, Reuters reported.
While GameStop posted lackluster sales for the fiscal year that ended in January, the Texas-based chain trumpeted preliminary results Monday that appeared to show its fortunes turning around at least somewhat.
GameStop said its global sales climbed about 11 percent year-over-year in the first nine weeks of the fiscal year starting Jan. 31 — a period that coincided with the late stages of the company’s Reddit-fueled market frenzy.
But GameStop noted that those sales were rising from a low baseline because the COVID-19 pandemic forced its stores around the world to close last spring.
With Post wires
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