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Shares of GameStop tumbled by double digits on Monday after the video game retailer said it may sell up to $1 billion worth of additional shares following a historic Reddit-fueled short squeeze.
GameStop saw its stock drop more than 10% to around $171 apiece after announcing a stock offering of up to 3.5 million shares. The company said it intends to use the proceeds to further accelerate its transformation as well as for general corporate purposes and further strengthening its balance sheet.
The offering is viewed as a way for the retailer to capitalize on its recent jaw-dropping rally prompted by a band of Reddit-obsessed retail traders who targeted heavily shorted stocks. GameStop surged 400% in a week in January to above $400 a share amid the massive short squeeze.
At the very beginning of the year, GameStop, a brick-and-mortar retailer, traded at less than $20 a share.
GameStop is in the middle of a technology and e-commerce transition led by activist investor and board member Ryan Cohen, who was Chewy’s co-founder. The company hired former Amazon and Google executive Jenna Owens as its new chief operating officer.
In a separate release on Monday, GameStop said its total global sales increased about 11% for the first nine-weeks of fiscal 2021 from the same period a year ago. For the five-week period ended April 2, total global sales grew 18%, the company said.
