GameStop raises $2.1 billion as "meme stock" traders drive up share price
GameStop received a $2.1 billion infusion of cash this week after selling 75 million new shares to eager investors.
The video game retailer, whose stock has been on a rollercoaster in recent weeks after being embraced by retail investors, disclosed in a regulatory filing on Tuesday that it plans to use the new funding for general corporate purposes, including possible acquisitions.
GameStop sold the shares at an average price of $28.50 each, according to Wedbush Securities. The stock sale comes three weeks after the company sold an additional 45 million shares, raising $933 million.
The stock fell 60 cents, or 1.9%, to $29.90 in afternoon trading.
GameStop shares soared in May after Keith Gill, a popular trader who touts his results online under the monikers "Roaring Kitty" and "DeepF_Value," resurfaced on social media after a long hiatus. Earlier this month, Gill posted a screenshot in a Reddit forum showing he owns roughly $116 million in GameStop shares.
Gill held a live video stream from his YouTube account last week and explained his rationale for backing GameStop. During the stream, Gill alluded to the company's efforts to shift its business model from selling games in brick-and-mortar stores to streaming.
"Given that GameStop's share price closed at $46 on June 6, we had assumed it would complete the sale at an average price of $40. Instead, the shares declined precipitously on June 7, reflecting news from Reddit following a rambling presentation by Roaring Kitty (Keith Gill), closing that day at $28," Wedbush, which set a 12-month price target of $11 on GameStop's stock, said of the new share offering.
GameStop didn't immediately respond to a request for comment.
Despite being a hot ticket among some investors, GameStop continues to lose money. Last week, the company reported a loss of $32.3 million on revenue of $882 million in its fiscal first quarter, with declining sales of hardware, software and collectibles. That compared with a loss of $50.5 million on revenue of $1.2 billion in the year-ago period.
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Khristopher J. Brooks is a reporter for CBS MoneyWatch. He previously worked as a reporter for the Omaha World-Herald, Newsday and the Florida Times-Union. His reporting primarily focuses on the U.S. housing market, the business of sports and bankruptcy.
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