Zinger Key Points
- GameStop shares are falling on news of a share offering and preliminary quarterly results.
- Several people warned that an offering was a high possibility with GameStop stock soaring during the week.
After a multi-day rally to start the week, shares of video game retailer GameStop Corporation GME are crashing Friday morning with news of preliminary quarterly results and an announced share offering.
What Happened: The week started with a bang for GameStop and other meme stocks with the return of the Roaring Kitty account on social media, believed to still be owned by Keith Gill, a prominent figure in the 2021 short squeeze storyline.
GameStop shares hit new 52-week highs on both Monday and Tuesday before seeing declines later in the week.
On Friday morning, the video game retailer announced that it expects first-quarter revenue to be in a range of $872 million to $892 million. The company reported $1.24 billion in revenue in last year's first quarter.
Analysts are expecting GameStop to report revenue of $1.05 billion in the first quarter, according to data from Benzinga Pro.
The company also filed an at-the-market offering of up to 45 million shares. The proceeds from the sale would be used for general corporate purposes, which could include investments and acquisitions.
While shares are falling on Friday’s news, many aren't surprised by the offering. This includes Benzinga's recent article listing five items that could hurt the GameStop rally.
"$GME If you don't expect an offering in garbage plays, you haven't been around very long," MightySoldiers said on X.
Future Fund Managing Partner Gary Black shares his commentary on the run in meme stocks.
"With $GME -50% in two days and another -22% this morning after pre-announcing bad 1Q results and a big (45M share) ATM equity offering, investors should realize once and for all that one shouldn't buy stocks just because they are going up. Numbers matter," Black tweeted.
Benzinga's "PreMarketPrep" co-host Dennis Dick also reminded investors that this is an example of why you should "sell your peanuts while the circus is in town."
"Roaring Kitty appears to be the most influential person on Wall Street," Dick tweeted earlier in the week.
CNBC host Jim Cramer suggested that GameStop will now need to merge with another company Friday.
"Gamestop and Petco? Gamestop and Party city? Gamestop and JC Penney? Gamestop and Victoria's Secret? Which is the best to merge with??" Cramer tweeted.
Cramer warned of potential share offerings from GameStop earlier in the week.
"Any CFO who knows what he or she is doing would be so grateful to the memesters so they could fix their balance sheets."
Cramer suggested GameStop could file for an at-the-market offering.
"GME would be nuts NOT to authorize and at the money sell program to raise cash and reinvest."
Related Link: EXCLUSIVE: Citron Research’s Andrew Left Is Short GameStop Again
Why It's Important: Another key meme stock from the 2021 storyline that jumped this week was AMC Entertainment Holdings AMC. The movie theater company said earlier in the week that it exchanged shares in a debt for equity swap as the share price was surging.
GameStop raised $551 million and $1 billion in offerings in April 2021 and June 2021 when shares were still elevated from their start of the year prices thanks to the meme stock rally and short squeeze that happened in January and February of that year.
GameStop ended the fourth quarter with $1.0 billion and continues to post quarterly losses in most quarters. The third and fourth quarters of the last fiscal year saw breakeven earnings per share and a profit, respectively.
The video game retailer saw fourth-quarter revenue of $1.79 billion, down from $2.23 billion in the previous year's fourth quarter. The total missed a Street consensus estimate of $2.05 billion.
For Friday's share price fall, it may be hard to tell whether the preliminary earnings or the share offering news is having a bigger impact on the stock.
Based on a price of $22.66 for GameStop shares at the time of writing, selling 45 million shares would raise around $1 billion for the company.
GME Price Action: GameStop shares are down 25.9% to $20.49 on Friday, versus a 52-week trading range of $9.95 to $64.84.
Read Next: Who Is Roaring Kitty? Why Does His Return To Social Media Matter For GameStop Stock?
Photo: Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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