GameStop Soars After $1 Billion Stock Sale

Game Stop

GameStop (NYSE:GME) shares soared as much as 22% on Tuesday following the announcement that the video game retailer raised nearly $1 billion through its latest equity offering.

GameStop’s stock opened at approximately $23, a significant drop from the near $65 level reached earlier in the month during a brief meme rally.

This surge in stock price highlights investor enthusiasm for meme stocks, which are often driven by online buzz rather than company fundamentals. Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance, “In a normal market, this would cause some concern. You don’t sell stock into the market if you think it’s undervalued; you do it when you think it’s overvalued.”

GameStop is heavily shorted, with a short interest of just over 21% of the float.

Taking advantage of the unexpected meme rally in mid-May, GameStop sold 45 million shares, raising about $933 million, according to a Friday statement. The company plans to use the net proceeds for general corporate purposes, potentially including acquisitions and investments.

The offering was initially announced on May 17 along with the company’s preliminary financial results, causing shares to drop as much as 30% that day.

Some Wall Street analysts viewed the offering as a smart move amid the video game retailer’s financial struggles. GameStop’s recent earnings report indicated a sharp decline in quarterly sales compared to the previous year.

GameStop’s stock sale coincided with a similar move by AMC Entertainment (NYSE:AMC), another meme stock. Earlier this month, AMC raised $250 million through the sale of 72.5 million shares. AMC shares rose more than 2% on Tuesday.

GameStop’s stock surge began on May 13, following the online reappearance of “Roaring Kitty,” a key figure in the 2021 meme stock frenzy.

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