GameStop slides again on move to sell shares after meme-stock rally
GameStop slumped 24% on Friday, after the struggling video game retailer said it would sell up to 45 million shares, taking advantage of the meme-stocks frenzy that took hold this week.
The Grapevine, Texas-based firm logged its highest trading volume in three years so far this week, following a series of posts from Keith Gill’s X account “Roaring Kitty,” whose bullish calls on GameStop were a reason for the 2021 meme-stock frenzy.
“Companies have also learned to take advantage of the market disruption with quicker secondary offerings,” said Rick Meckler, partner at Cherry Lane Investments.
GameStop logged its highest trading volume in three years so far this week, following a series of posts from Keith Gill’s X account “Roaring Kitty.”
“This can blunt price rises by meeting demand with additional new shares being supplied,” Meckler said.
GameStop has filed for a mixed-shelf offering, under which a company can raise capital by selling different types of securities in one or more separate offerings.
In a similar move, struggling theater chain AMC completed a $250 million “at-the-market” share sale program on Monday.
The company has also entered an equity-for-debt swap deal as it attempts to pare down its debt.
Shares of AMC dropped 3.2% in early trading.
GameStop said its first-quarter net sales were expected to drop to the range of $872 million to $892 million, from $1.237 billion a year ago.
The company, which largely relies on sales at its brick and mortar stores, has been hurt by customers’ transition to buying video games and collectibles online.
GameStop said its first-quarter net sales were expected to drop to the range of $872 million to $892 million, from $1.237 billion a year ago. REUTERS
But net loss in the quarter ended May 4 is expected to be between $27 million and $37 million, narrower than the $50.5 million a year ago, as GameStop benefits from cost cuts.
GameStop’s stock is set to erase most of its gains since the two-day rally in the beginning of the week sent it as high as $64.83.