On April 5, GameStop shares declined by 12%. The video game retailer announced it may sell up to $1 billion worth of stock. Significantly, it takes advantage of a rally in its shares in 2021 on the back of a Reddit-driven retail trading frenzy.
According to GameStop, the company will sell up to 3.5 million shares. The retailer will use the proceeds to speed up the shift in its business model to e-commerce in an overhaul. Significantly, an overhaul is driven by a top shareholder and board member Ryan Cohen.
At April 1’s closing value of $191.45, the at-the-market sale could push GameStop up to $670 million. Still, GameStop is not forced to sell shares at that value since at-the-market programs enable businesses to sell stock over a prolonged period.
The stock of the video game retailer has boosted by over 900% in 2021
The stock of the video game retailer has boosted by more than 900% so far this year. It gave the firm a valuation of $34 bn as retail traders bet against Wall Street hedge funds that had reduced its shares.
Movie theater operator AMC and airline operator American Airlines were able to sell stock. However, GameStop was incapable of doing so because of regulatory restrictions. Remarkably, AMC and American Airlines also benefited from the Reddit-fueled trading frenzy in January.
GameStop informed investors that the purchase of shares in its offering may result in a significant loss if the price of its stock decreases.
The new at-the-market offering plan filed with the U.S. Securities and Exchange Commission replaces one from December, in which GameStop had filed to sell $100 million worth of stock.
GameStop announced it had not sold any stock under the December prospectus.
GameStop reported Jefferies LLC is acting as its sales agent for the new offering at a commission of up to 1.5% of the gross sales price per share.
Separately, GameStop announced global sales for the nine weeks ending April 4 grew by nearly 11%.
Its shares dipped at $168.76 in premarket trading.