GameStop in new surprise with plan to sell $1bn extra shares

The video game retailer fell in New York as broker Jefferies lined up to manage the offering of up to 3.5m shares

Mon, 05 Apr, 2021 - 17:07

Divya Balji

Shares in GameStop, the retailer at the centre of the small shareholders' revolt against Wall Street, fell after the company said it may sell up to $1bn (€850m) worth of additional shares in one of the largest equity offerings ever announced for the retail sector in the US.

The video game retailer fell in New York as broker Jefferies lined up to manage the offering of up to 3.5m shares, according to a statement. The proceeds from the shares sale 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.

The video retailer was at the centre of a bizarre battle between small share traders using the Reddit social media platform who favoured GameStop shares to take on Wall Street hedge funds over the value of the company.

Latest plan

GameStop's latest plan is also different from traditional secondary offerings as it enables the company to sell shares directly into open market buying that has included 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,” said Telsey Advisory Group analyst Joe Feldman in an email.

“Cash would be a more attractive currency than stock to complete an acquisition to accelerate the transformation.”

More than 2.7m shares changed hands in the first 10 minutes of trading on Monday, more than double what has been seen over the past five sessions.

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 a chief technology officer, adding technology-focused senior executives to its team to move the company away from its brick-and-mortar business.

In a separate statement, GameStop released preliminary sales results for the first nine weeks of fiscal 2021, where total global sales increased about 11% from the same period a year ago. Total global sales jumped 18% in March after a 5.3% rise in February.