Reddit’s Favorite Company GameStop is Planning a $1 Billion Stock Sale

Video gaming retailer GameStop announced on Monday that the company may sell up to $1 billion worth of additional shares.

Shares were down as much as 14% on the news of the company offering up to as much as 3.5 million shares. GameStop has said it plans to use the proceeds from the offering to accelerate its e-commerce transformation and for general corporate purposes as well as strengthening their balance sheet.

The company is in the process of a major overhaul and transition to e-commerce which is being led by activist investor and board member Ryan Cohen. Cohen is also the co-founder of pet supply company Chewy.com. GameStop has additionally hired former Google and Amazon executive Jenna Owens as its new chief operating officer.

It was earlier this year that GameStop became a favorite stock on Reddit boards and had an astounding short squeeze that sent the stock surging 400% in just a week to over $400 a share.

At the start of the year shares had been trading under $20. In April of 2020, shares were under $3 a piece as the pandemic pushed the company to temporary closing its brick and mortar locations.

“The positive story is they’ll have more money to invest in their digital revolution, and the negative story is it’s massive dilution and would likely mean the stock faces some near-term pressure,” said Thomas Hayes, chairman of private equity investor Great Hill Capital.

“A lot of interested parties have been asking when GameStop would do something like this,” said Joseph Feldman, analyst at brokerage firm Telsey Advisory Group. “The stock has remained elevated so the company is taking advantage of the access to capital.”

GameStop also announced on Monday that the company’s 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, the company revealed that total global sales grew 18% year-over-year.

It was in March that the company had disappointed Wall Street with worse than expected fourth quarter results missing both the top and bottom lines. E-commerce sales however had seen an increase of 175% in the last quarter and accounted for more than a third of the company’s sales that period.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.