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GameStop shares fall sharply amid plans to sell 5 million shares, SEC investigation

Benjamin Franklin remains baffled by the seemingly unwarranted move in GameStop's stock price.
expand / Benjamin Franklin remains baffled by the seemingly unwarranted move in GameStop’s stock price.

GameStop’s quarterly earnings report released last night. There̵

7;s good news for struggling retailers. This includes lower-than-expected operating losses. and the company’s first year-over-year increase in quarterly revenue in years. But GameStop’s inflated share price fell sharply in early trading on news that the company plans to sell more shares and announced it was cooperating with a Securities and Exchange Commission investigation into the phenomenon. m”

In what CEO George Sherman called a “strong start to the year,” GameStop’s net sales rose more than 25 percent to $1.3 billion in the fiscal quarter ended April 30. down about 12 percent due to Our strategic congestion efforts and continued store closures in Europe during the quarter due to the COVID-19 pandemic.” The increase in sales wasn’t enough to keep GameStop back on track. profit again But it was enough to reduce its quarterly loss to $66.8 million (or $29.4 million if you made a one-time payment), down from $108 million last year.

We want to buy, we want to sell.

Moreover Last quarter saw GameStop’s profit up by selling an additional 3.5 million shares worth $551 million to a crazy market that was willing to pay an average of nearly $160 per share. Thanks to the massive cash inflow, GameStop eliminated $504 million of long-term debt on its balance sheet last year. And it now has $770.8 million in cash on hand, up from $583.9 million a year ago.

In this way, the meme-driven investors driving GameStop’s share price have provided real financial clues that the company can use to tackle tougher quarterly trends in the future. at least in the near term

GameStop’s latest IPO has been a huge success. In fact, the company said it now hopes to sell up to 5 million. over The stock is “for general corporate purposes as well as investing in growth initiatives and keeping a strong balance sheet,” while it will be valued at more than $1.5 billion at a near-unprecedented closing price of $302.56 a share yesterday. But there’s no guarantee that the share price will remain high by the time GameStop manages to make its next public offering.

In fact, as of Thursday morning’s writing, GameStop shares were around $256 per share, down more than 15 percent, despite reporting stronger-than-expected earnings. This may reflect the market perception that the oversales that GameStop is selling has reduced the company’s stake. existing Warehouse. Again, GameStop’s share price hasn’t been linked to the company’s basic revenue potential for months. And while GameStop’s stock lost about 33 percent in value the day after it reported poor-than-expected 2020 financial results. It got all that value back and more the next day.

SEC investigation and new executives

Markets may respond to GameStop’s announcement that the SEC asked the company on May 26 to provide documents and information as part of its investigation into the “meme stock” trading that drove the “memory stock.” Such volatility for stocks this year. “We are reviewing the request and providing the requested documentation. and intends to cooperate fully with SEC officials on this matter,” GameStop said in a statement. “This investigation is not expected to adversely affect us.”

GameStop is also following the official naming of Chewy co-founder Ryan Cohen as chairman of the board with the appointment of two Amazon veterans on the executive team, Matt Furlong, as CEO and Mike Recupero as CFO, effective June 21. That might be a good sign. For Cohen’s stated goal of “Build a powerful ecommerce platform that offers competitive pricing. Wide selection of games fast delivery and a truly tangible experience that excites and delights customers.”

But Cohen yesterday declined to elaborate. about his plans to create that pivot point, saying, “You won’t find us talking about big games. make many lofty promises or send our tactics to the competition.”

That didn’t impress some analysts who continued to track stocks that were at least volatile, Baird analyst Colin Sebastian wrote in a note to clients. “Investors deserve more than Meme to focus on the company’s fundamentals and long-term prospects.

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