GameStop to Sell Stock After Social-Media Fueled Trading Frenzy -- 2nd Update
4/5/21, 3:02 PM GameStop Corp. said it could raise hundreds of millions of dollars from stock sales in the coming months, as the videogame retailer turns to public markets to help support its turnaround plan.
The company said Monday that it would sell up to 3.5 million shares, adding that the timing and amount of any stock sale would involve various factors.
Though it has had the ability to sell up to $100 million in stock since December, GameStop -- unlike theater chain AMC Entertainment Holdings Inc. -- had resisted raising cash in that manner as retail investors helped fuel a remarkable run up in the company's stock price.
GameStop's stock traded under $3 apiece in April last year as the pandemic prompted the temporary closure of its bricks-and-mortar locations, though it ended 2020 at just below $19. Shares peaked at $483 in intraday trading Jan. 28 only to trade just below $39 about three weeks later. Shares closed Thursday at $191.45, a more than 10-fold increase since the start of the year.
Last month, GameStop said it had been evaluating whether to increase the size of its stock-selling plans.
A GameStop representative declined to comment beyond the press releases the company issued.
Shares fell about 8% after the company disclosed the offering and preliminary sales figures through the current quarter.
The stock offering could dilute the company's shares by up to 5%, Telsey Advisory Group retail analyst Joseph Feldman said. Having a pile of cash would help the company find acquisition targets down the road, Mr. Feldman said. The company had $508.5 million in cash and cash equivalents as of Jan. 30, according to its latest annual report.
"They're in an enviable market position right now with regard to their share price," Mr. Feldman said.
The Grapevine, Texas-based company said its sales grew roughly 11% for the nine weeks ended April 3 from the comparable period a year earlier, when its operations took a hit from temporary store closures at the dawn of the Covid- 19 pandemic. GameStop had roughly 13% fewer stores this year than a year earlier, it said.
GameStop is working to transform its decades-old bricks-and-mortar business to become more technology-centric. The company added Chewy Inc. co-founder Ryan Cohen to its board before GameStop's furious rally earlier this year after the tech executive urged the company to focus on e-commerce and reduce its store count among other initiatives. Mr. Cohen, one of the company's largest shareholders, was appointed in March to lead a board committee dedicated to transforming the retailer.
The company has been shuffling its management ranks and is in the process of retooling its board, as the majority of directors have informed the company that they plan to step down from the panel later this year. Earlier this month, the company said Chris Homeister, the merchandising chief, plans to resign due to his diminished responsibilities. GameStop has hired several executives from Amazon.com Inc. and Chewy for top posts.
In GameStop's most recent quarter which included the holiday-shopping season, the company's sales fell slightly from a year earlier as coronavirus-related closings weighed on its operations. The company, however, has since pointed to improving sales trends. Chief Executive George Sherman has said the company will benefit from initiatives such as expanding its product selection to make it less dependent on the releases of new gaming consoles from the likes of Sony Corp. and Microsoft Corp.
A slate of coronavirus-stricken companies have turned to the public markets to keep afloat during the Covid-19 pandemic. AMC raised enough cash to take the prospect of an imminent bankruptcy filing off the table, and its stock became a darling of the retail-investing community. AMC's stock price has more than quadrupled so far this year.
Write to Dave Sebastian at [email protected]
Corrections & Ampliifcations
This article was corrected at 3:00 p.m. ET because the original version incorrectly said GameStop was evaluating whether to increase the size of its stock-buying plans. Last month, GameStop said it had been evaluating whether to increase the size of its stock-selling plans.