It’s been a while since I last wrote about the January GameStop Stock Incident (if you need a refresher, be sure to check out the article I wrote explaining it), but that’s because nothing’s really changed, just mostly people holding onto the stock waiting for another spike. Well, that big change is here, but I’m not sure if it’s the one people have been waiting for because on April 5 GameStop Corp announced that it plans on selling its stocks for $1 billion.
Originally, GameStop planned on selling its stock for $100 million, but now that it’s able to sell its stock, the company is going to capitalize on the situation.
If you ever wonder why GameStop never capitalized on its stock reaching new heights, it’s because it wasn’t able to. According to sources speaking to Reuters, the company “decided it was restricted under U.S. financial regulation from selling shares because it had not yet updated investors on its earnings…”
The SEC requires updated information to be released prior to a stock sale and GameStop could’ve gone ahead with it, but it would have been a logistical nightmare and the potential regulatory risk too much of a hassle to deal with.
Long Time Coming
In its regulatory filing for the offer, GameStop finally addressed the extreme heights the company’s stock achieved which is currently selling for $184.50 a share. The company said, “we have not experienced any material changes in our financial condition or results of operations that would explain such price volatility or trading volume.”
GameStop just wants to capitalize on the squeeze of their own stock and isn’t even being greedy about it. Real folks know what’s up 🤙😉
— Nolil (@Nolil9) April 6, 2021
GameStop continues on to say in this recent statement that investors who purchase shares during this offering might lose a large amount of their investment if its stock price continues to decrease.
While the Going is Good
Joseph Feldman, an analyst for the Telsey Advisory Group, said “The stock has remained elevated so the company is taking advantage of the access to capital [and] they’re in an enviable market position right now…” Feldman also says the stock offering could dilute the company’s shares up to 5%, but having that extra cash on hand could help with future acquisitions.
It appears that GameStop is preparing for a metamorphosis of sorts as seen when the company added Ryan Cohen, co-founder of online pet shop Chewy, to its board as it transitions to focus on e-commerce.
GameStop reported that during the holiday season sales went down, but sales trends are starting to improve. Chief Executive for GameStop George Sherman said GameStop plans on expanding its product offerings into other areas like gaming computers and mobile games while moving to depend less on console gaming.
In addition to hiring Ryan Cohen, GameStop also hired former Amazon executive Jenna Owens to push in this new effort.
So what do you think of this? We’ve been waiting a long time for GameStop to respond to its stocks trying to reach the moon and now we have their response. I’m curious to see where GameStop goes from here.