Struggling video game retailer GameStop fell 24% on Friday after announcing it would sell up to 45 million shares to capitalize on the meme stock frenzy that began this week.
The Grapevine, Texas-based company posted its highest trading volume in three years this week following a series of posts from Keith Gill’s X account, Roaring Kitty. Bullish calls for GameStop were the reason for the meme stock frenzy in 2021.
“Companies have also learned to take advantage of market disruptions with faster secondary offerings,” said Rick Meckler, partner at Cherry Lane Investments.
“Additional new stock supply will help meet demand and slow price increases,” Meckler said.
GameStop has filed for a mixed public offering that allows companies to raise capital by selling different types of securities in one or more separate offerings.
In a similar move, struggling theater chain AMC on Monday completed a $250 million “over-the-counter” stock sale program.
The company also entered into an equity-debt swap deal to reduce its debt.
AMC stock fell 3.2% in early trading.
GameStop said it expects first-quarter net sales to be in the range of $872 million to $892 million, down from $1.237 billion in the year-ago period.
The company relies primarily on sales in its brick-and-mortar stores, but has been hurt as customers increasingly buy video games and collectibles online.
However, GameStop is expected to benefit from cost cuts and report a net loss of $27 million to $37 million for the quarter ending May 4, down from $50.5 million a year earlier.
GameStop shares are on track to erase most of their gains after rising to $64.83 during the first two days of the week.
