GameStop shares fell sharply on Monday after the video game retailer said it could sell up to $ 1 billion in additional shares as it seeks to profit from a Reddit-related trading spree earlier this year. year.
The Texas-based company said it could offer and sell up to 3.5 million of its shares, with the proceeds being used to “accelerate its transformation” and strengthen its balance sheet.
“The timing and amount of any sale will be determined by a variety of factors,” GameStop said in a statement.
Shares of the video game retailer fell more than 19 percent in pre-market operations in New York City, although most of those losses were recouped during the trading session. GameStop ended the day almost 3% lower, at $ 187.
In January, the company was at the center of a stock-selling frenzy, led by American amateur investors, which bet on popular stocks like GameStop and automaker Tesla.
The coordinated effort from users of the Reddit online forum pushed GameStop’s stock price to an all-time high of $ 483 and was designed to turn the screw on short sellers.
In a separate announcement on Monday, GameStop revealed a resumption of its global sales operations, which had been rocked by the disruption due to the pandemic.
For the nine weeks ending April 3 of this year, total global sales are up about 11% from the same period a year ago, the company said.
“During the first quarter of fiscal 2020 and due to the spread of Covid-19 around the world, the company’s various operations in 14 countries were negatively affected due to temporary store closures and other restrictions government-imposed that resulted in limited operations, ”GameStop told me.
The retailer announced in March that it had named Jenna Owens, a former Amazon and Google executive as the new chief operating officer, is part of a larger reshuffle of his management team as he has sought to stem a decline in sales for years.
GameStop had previously enlisted Ryan Cohen, its largest shareholder and co-founder of Chewy.com, to lead an expansion of its e-commerce business.
In the years leading up to the pandemic, GameStop’s sales had plummeted as the company struggled to adjust to a newly digitized market, where free online downloads and games were dominant and mall traffic dwindled. .
The move comes as companies from all walks of life have rushed to exploit the equity market rally in recent months. In the first quarter, publicly traded companies around the world issued $ 179 billion in new equity, the highest level at the start of the year since 2015, according to data from Refinitiv.
“It’s something [GameStop] should have done it months ago, ”said Michael Pachter, analyst at Wedbush Securities. The issue, he noted, is expected to provide the retailer with sufficient liquidity to “make the investments in [Cohen’s] business transformation strategy ”.