GameStop stocks cut losses after the Reddit favorite planned a $ 1 billion stock sale
GameStop shares trimmed their double-digit volatile trading losses that occurred Monday morning after the video game retailer announced it was selling up to $ 1 billion in additional shares following a historic Reddit short squeeze.
GameStop closed 2.4% at $ 186.95 per share. Earlier in the day, the company fell as much as 14% after announcing a stock offering of up to 3.5 million shares. The company intends to use the proceeds to further accelerate its e-commerce transformation as well as for general corporate purposes and to further strengthen its balance sheet.
The offer is seen as a way for the retailer to capitalize on its recent staggering rally, sparked by a group of Reddit-obsessed retailers aiming for sharply shortened stocks. GameStop rose 400% to over $ 400 per share in a week in January.
Earlier in the year, GameStop, a brick and mortar retailer, was listed at less than $ 20 per share.
GameStop is in the midst of a technology and e-commerce transition led by activist investor and board member Ryan Cohen, the co-founder of Chewy. The company hired former Amazon and Google CEO Jenna Owens as its new chief operating officer.
In a separate release on Monday, GameStop announced that total global revenue in the first nine weeks of fiscal 2021 was up approximately 11% year-over-year. In the five-week period ending April 2, total global sales increased 18% year over year.
“The company has not yet shown financial success in an industry that is rapidly moving to digital,” said Joseph Feldman, an analyst at Telsey Advisory Group, in a statement on Monday. “We continue to believe that the current valuation far exceeds our rosy fundamental expectations and projected multi-year benefits from the strategic transformation.”
Two weeks ago, the company reported worse-than-expected fourth-quarter results that were missed in the upper and lower ranges. However, GameStop announced that e-commerce sales grew 175% in the most recent quarter, accounting for more than a third of sales for the period.