Shares were the first to hit Reddit and huge social networks earlier this year and rose by about 1,100 percent in 2021.
GameStop Corp.’s this year’s meteoric rally is losing one of its first meme-stock icons after the company said it intended to sell more shares and offered few details about its turnaround strategy.
Texas video game retailer The Grapevine fell 27% to $ 220.39 on Thursday, the biggest drop since March 24. Stocks, the first to reach Reddit and huge social networks earlier this year, rose by about 1,100 in 2021, amid retail investors taking on short sellers and the optimism of corporate translation.
With a stock of about $ 503 a day record of $ 483, investors are still waiting for a clear strategy from President Ryan Cohen and new entrepreneurial investors. GameStop announced a couple of new leaders from Amazon.com Inc. to help turn the brick chain into an e-commerce powerhouse.
“Investors deserve more than memes to value the company’s long-term solutions,” analyst Colin Sebastian Baird wrote in a note. While it clearly sets out the basics for the digital transformation, the board is not ready to reveal details about some of the challenges, he said.
It is also news that GameStop may offer another 5 million shares and that its past trading activity is being investigated by the Securities and Exchange Commission with the weight of its shares.
“The trading probe is certainly a big red flag,” David Trainer, CEO of New Constructs Investment Research, said in an interview. It may be “a needle that can break the balloon of stock valuation.”
For analyst Michael Pachter Wedbush, the result of the probe is unclear and investors will be disappointed with the planned share offer. As a result of the shelves’ record “may have had something to do with the results,” Pachter wrote in a note Thursday. However, he considers the sale of potential shares to be positive because it would provide more dry powder for purchases for the company.
GameStop’s earnings call, which aired live on Youtube and had thousands of viewers, lasted just 11 minutes. Outgoing CEO George Sherman was the only executive who spoke out and did not want to ask analysts questions.
Sherman will be replaced on June 21 by Matt Furlong, who has led Amazon’s Australian operations. GameStop also hired another former Amazon student, Mike Recupero, as chief financial officer. The new hires are part of Cohen’s extensive effort to turn the company into a success story.
GameStop introduced a potential sale of 5 million shares through a market offering that allows retail investors to buy directly. He previously raised $ 551 million through an ATM in April. The company has otherwise stayed away from selling shares this year, even as analysts have had floods of memes to increase equity and flood the deal with similar deals. The new stock sales program announced Wednesday will allow GameStop to raise $ 1.51 billion, based on the final closing price.
The retailer also reported better-than-expected quarterly sales of $ 1.28 billion and lower-than-expected losses.