GameStop Shares Drops, Company to Offer Additional $1B Stock Sales

Reddit “meme stock” favorite GameStop announced it would sell up to 3.5 million shares and released early sales figures.

Following the surge in GameStop shares in 2021, the company makes plans to sell up to $1 billion worth of additional shares in one of the largest at-the-market equity offerings ever announced for the retail sector.

It was reported that the fund raised from the sales of the shares could help the video game retailer company to finance its digital transformation and strengthen its balance sheet.

The video game retailer erased an early 14% drop to close 2.4% lower in New York at $186.95. Jefferies will manage the offering of up to 3.5 million shares, according to a statement, and proceeds will be used to further accelerate its corporate transformation.

GameStop’s offering plan is 10 times larger than one it announced in December with Jefferies, according to data compiled by Bloomberg.

However, the potential dilution to shareholders is about the same since the retailer was worth $13.4 billion at Thursday’s close, roughly 10 times its value at the end of 2020.

The at-the-market program is also different than traditional secondary offerings as it enables the company to sell shares directly into the open market, allowing it to take advantage of an influx of individual investors.

“It makes sense to convert some of the stock into cash, which could then be used to accelerate the transformation effort,”

“Cash would be a more attractive currency than stock to complete an acquisition to accelerate the transformation.” Said Telsey Advisory Group analyst Joe Feldman in an email.

GameStop shares have moved sideways over recent weeks and nearly 14 million shares changed hands on Monday, that’s less than half what’s been seen on average over the past month.

It’s reported that traders will keep a close eye on trading volume this week as the nature of the offering means the company can complete the stock sale at their discretion.

As part of a corporate overhaul spearheaded by activist investor and board member Ryan Cohen, the company has brought in a number of new executives including a chief growth officer and chief technology officer, adding technology experience to its team to help move the company away from its brick-and-mortar business.

In a separate statement on Monday, GameStop released preliminary sales results for the first nine weeks of fiscal 2021. Total global sales increased about 11% from the same period a year ago, jumping 18% in March after a 5.3% rise in February.