Shares were among the first to get a huge Reddit and social media after earlier this year and rose by around 1,100% in 2021.
The meteoric concentration of GameStop Corp. this year, as one of the first meme icons, it could be losing strength after the company said it planned to sell more shares and offer few details about its change strategy.
Texas-based video game retailer Grapevine fell 27% to $ 220.39 on Thursday, the biggest drop since March 24th. Shares, which were among the first to get a huge Reddit and social media post after this year, have risen close to 1,100% in 2021 as retail investors teamed up to take on short-term, mid-term sellers. optimism in business change.
With shares up about 50 percent from the $ 483 intraday record high, investors are still waiting for a clear strategy from newly appointed president and investment activist Ryan Cohen. GameStop announced a couple of new leaders from Amazon.com Inc. to help turn the brick and mortar chain into an ecommerce source.
“Investors deserve more than memes to assess a company’s long-term fundamental prospects,” Baird analyst Colin Sebastian wrote in a note. While it clearly lays the groundwork for the digital transformation, the board is not prepared to divulge details on some of the challenges, he said.
The news that GameStop may offer another 5 million shares and that the Stock Exchange Commission is also investigating previous trading activity is weighing on its shares.
“The trading probe is certainly a big red flag,” David Trainer, chief executive of investment research firm New Constructs, said in an interview. It can be “the needle that can destroy the action valuation balloon.”
For Wedbush analyst Michael Pachter, the result of the probe is unclear and investors may have been more disappointed with the expected stock offer. The shelf record “may have had something to do” with the decline after the results, Pachter wrote in a note Thursday. However, he believes the possible sale of shares is positive for the company as it would provide more dry powder for the acquisitions.
GameStop’s earnings call, which aired live on YouTube and had several thousand viewers, lasted just 11 minutes. Outgoing general manager George Sherman was the only executive to speak out and declined to receive questions from analysts.
Sherman will be replaced on June 21 by Matt Furlong, who led Amazon’s Australian operations. GameStop also hired another Amazon alumnus, Mike Recupero, as CFO. New hires are part of Cohen’s broader effort to transform the company into a success story.
GameStop requested the potential sale of up to 5 million shares through a market offering, which allows retail investors to buy directly. It previously raised $ 551 million through an ATM offer in April. On the other hand, the company has remained on the sidelines of selling shares this year, despite calls from analysts to increase equity and a flood of similar offers from other meme shares. The new stock sale program announced Wednesday allows GameStop to raise up to $ 1.51 million, depending on the latest closing price.
The retailer also reported better-than-expected quarterly sales of $ 1.288 billion and a narrower-than-expected loss.