GameStop shares fell 27 percent after earnings report | Financial Markets News

The stock was one of the first to have a huge Reddit and social media following this year and grew by about 1,100 percent in 2021.

Di Bloomberg

At GameStop Corp. this year as one of the first meme-stock icons may lose steam after the company said it plans to sell more shares and offer a few details on its turnaround strategy.

Texas-based video game retailer Grapevine fell 27% to $ 220.39 on Thursday in its biggest drop since March 24th. % in 2021 as retail investors come together to face sellers in the short and mid-term optimism about a corporate revolution.

With the stock about 50% off its intraday record high of $ 483, investors are still waiting for a clear strategy from newly appointed president and investment activist Ryan Cohen. GameStop has announced a couple of new executives from Inc. to help transform the brick and mortar chain into an e-commerce powerhouse.

“Investors deserve more than memes to value a company’s fundamental and long-term prospects,” Baird analyst Colin Sebastian wrote in a note. While clearly laying the groundwork for digital transformation, the board is not ready to divulge details on any challenges, he said.

News that GameStop may offer another 5 million shares and that past trading activity is being investigated by the Securities and Exchange Commission also weighs on its stock.

“The marketing probe is definitely a big red flag,” David Trainer, executive director of investment research firm New Constructs, said in an interview. It may be “the needle that can bust the balloon of stock valuation.”

For Wedbush analyst Michael Pachter, the result of the survey is unclear and investors may be more disappointed with the stock offer. The shelf record “may have something to do with” decreased after the results, Pachter wrote in a note Thursday. However, he sees the potential sale of shares as a positive for the company because it provides more dry powder for purchases.

Live broadcast

GameStop’s winning call, which aired live on YouTube and had several thousand viewers, lasted only 11 minutes. George Sherman, outgoing CEO, was the only executive to speak out and declined to take questions from analysts.

Sherman will be replaced on June 21 by Matt Furlong, who led Amazon’s Australian operations. GameStop has also hired another former Amazon CEO, Mike Recupero, as chief financial officer. The new recruits are part of Cohen’s broader effort to transform the company into a success story.

GameStop has presented for potential sales of as many as 5 million shares through an offer to the market, which allows retail investors to buy directly. Previously, it raised $ 551 million through an ATM offer in April. The company has otherwise strayed from selling shares this year, despite calls from analysts to raise equity and a plethora of similar treatments by its meme partners. The new stock sales program announced Wednesday allows GameStop to raise up to $ 1.51 billion, based on the latest closing price.

The seller also reported better-than-expected quarterly sales of $ 1.28 billion and a loss that was tighter than expected.

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