GameStop capitalizes on surge with $1-billion share sale program
GameStop Corp. is set to cash in on its 2021 surge after the company said it may sell as much as $1 billion worth of additional shares in one of the largest at-the-market equity offerings ever announced for the retail sector.
The video game retailer’s shares erased an early 14% drop Monday to close 2.4% lower at $186.95.
Jefferies will manage the offering of as many as 3.5 million shares, according to a statement, and proceeds will be used to further accelerate its corporate transformation.
GameStop’s offering plan is 10 times larger than one it announced in December with Jefferies, according to data compiled by Bloomberg. However, the potential dilution to shareholders is about the same because the retailer was worth $13.4 billion at Thursday’s close, roughly 10 times its value at the end of 2020.
The at-the-market program is also different than traditional secondary offerings as it enables the company to sell shares directly into the open market, allowing it to take advantage of an influx of individual investors.
“It makes sense to convert some of the stock into cash, which could then be used to accelerate the transformation effort,” Telsey Advisory Group analyst Joe Feldman said in an email. “Cash would be a more attractive currency than stock to complete an acquisition to accelerate the transformation.”
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Nearly 14 million GameStop shares changed hands Monday, that’s less than half what’s been seen on average over the last month. Traders will keep a close eye on trading volume this week because the nature of the offering means the company can complete the stock sale at its discretion.
As part of a corporate overhaul spearheaded by activist investor and board member Ryan Cohen, the company has brought in a number of new executives, including a chief growth officer and chief technology officer, adding technology experience to its team to help move the company away from its bricks-and-mortar business.
In a separate statement Monday, GameStop released preliminary sales results for the first nine weeks of fiscal 2021. Total global sales increased about 11% from the same period last year, jumping 18% in March after a 5.3% rise in February.
GameStop, based in the Dallas suburbs, has suffered with the video-game industry’s shift to online distribution. With gamers downloading more and more — or at least ordering software and gear via e-commerce — there’s less reason to make a trip to a physical store. The company reported disappointing fourth-quarter earnings last month.
Bloomberg writer Divya Balji contributed to this report.
