GameStop Discloses It Could Capitalize On Reddit-Fueled Rally With A Stock Sale

GameStop Corp. GME said Tuesday it may sell additional equity shares as the video game retailer seeks to capitalize on the more than 800% surge in its stock price since January amid a Reddit-fueled trading frenzy earlier this year.

What Happened: In a regulatory filing for its fourth-quarter earnings results, GameStop said that since January, it has been evaluating whether to increase the size of its at-the-market, or ATM, program. In December, the company established the ATM program that provides for the sale of shares of its Class A common stock having an aggregate offering price of up to $100 million.

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GameStop added that it has also been evaluating whether to potentially sell shares of its Class A common stock under the increased ATM program during the course of fiscal 2021, primarily to fund the acceleration of its future transformation initiatives and general working capital needs.

However, GameStop warned that a large number of shares of its Class A common stock available for future sale could adversely affect its stock price.

While GameStop’s fourth-quarter results missed analysts’ estimates, the brick-and-mortal retailer’s e-commerce business registered a year-over-year rise of 175% in the fourth quarter and 191% for the full fiscal year.

See Also: GameStop CCO Resigns Ahead Of Q4 Earnings Report

Why It Matters: Shares of GameStop and other heavily-shorted stocks such as AMC Entertainment Holdings Inc. AMC skyrocketed in January as retail traders belonging to the Reddit Investor forum r/WallStreetBets bid up the stocks to create a short squeeze.

GameStop, AMC, alongside other so-called "meme stocks" like Rocket Companies Inc. RKT continued to see strong retail investor interest on Tuesday. The recent surge in GameStop’s shares is attributed to rising expectations for the company to adopt a digital business model led by major shareholder Ryan Cohen.

Price Action: GameStop shares closed 6.6% lower on Tuesday at $181.75 and further tumbled 15.3% in the after-hours session.

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