By Michelle Chapman and Alex Veiga

Two months after a market phenomenon took shares of GameStop to the moon, the video game retailer said Monday that it will sell up to 3.5 million of its shares.

The shares will be sold through an “at-the-market” offering, which lets companies place their stock on the market over a period of time.

The announcement sent shares of GameStop, up 850% this year, down 8% at the opening bell.

The GameStop saga has been one of the biggest stories on Wall Street this year.

The company had been pummeled as new technology allowed people to download games, rather than buying a physical copy from GameStop or somewhere else. That shift threatened the existence of GameStop and its shares had been more than halved, to $20 each, by the start of this year.

A number of hedge funds, believing the value of GameStop shares would fall further, shorted the company, or bet against its shares. However, a group of smaller investors who communicated largely on Reddit challenged those hedge funds, believing they were wrong or that they could catch them in a “short squeeze."

To short a stock, an investor borrows shares at the current price for a fee, and buys them back at a later date. If the shares fall, the investors pockets the difference. If it rises, it can lead to massive losses because the borrowed stock is now worth more than was paid for it, and the investor must pay the difference.

That's exactly what happened this year and shares of GameStop rocketed from $20, to $483, and ravaging short sellers like Citron Research.

At the same time, it made a bunch of small investors very wealthy.

Market pundits had urged the company to put more shares on the market as the price spiked. Such a stock sale would have allowed to company to pay down hefty debts and even revive the company by pursuing a new business plan.

And two weeks ago, GameStop disclosed in a filing with the Securities and Exchange Commission that it actually had been considering such a move since January.

Even though it did not announce the share sale when share prices peaked, GameStop could wipe existing debt of the books if it chooses.

The company's stock closed at $191.45 last week, meaning it could raise as much as $670 million. GameStop's net debt was around $430 million in January. However, because the sale is "at-the-market,” it gives the company more flexibility as to when the sales happen.

A company's shares typically slide after it announces it will sell more shares because it tends to water down the value of shares that are already out there. That's certainly what happened Monday.

Yet the GameStop story has veered from what most would consider reality for four months now and it remains to be seen if those smaller investors will continue to play this game. And more importantly, the volatile trading has attracted bigger players, making the trade even riskier.

Still, shares had fallen as much as 16% before the opening bell and bounced back somewhat in early trading Monday. This year, double-digit swings in the company's stock has become common.

The company, based in Grapevine, Texas, also said Monday that preliminary fiscal first-quarter to-date global sales are up about 11% from a year ago, a period when the pandemic slammed the U.S. and retailers like GameStop were forced to close its stores.

Share:
More In Business
Michigan Judge Sentences Walmart Shoplifters to Wash Parking Lot Cars
A Michigan judge is putting sponges in the hands of shoplifters and ordering them to wash cars in a Walmart parking lot when spring weather arrives. Genesee County Judge Jeffrey Clothier hopes the unusual form of community service discourages people from stealing from Walmart. The judge also wants to reward shoppers with free car washes. Clothier says he began ordering “Walmart wash” sentences this week for shoplifting at the store in Grand Blanc Township. He believes 75 to 100 people eventually will be ordered to wash cars this spring. Clothier says he will be washing cars alongside them when the time comes.
State Department Halts Plan to buy $400M of Armored Tesla Vehicles
The State Department had been in talks with Elon Musk’s Tesla company to buy armored electric vehicles, but the plans have been put on hold by the Trump administration after reports emerged about a potential $400 million purchase. A State Department spokesperson said the electric car company owned by Musk was the only one that expressed interest back in May 2024. The deal with Tesla was only in its planning phases but it was forecast to be the largest contract of the year. It shows how some of his wealth has come and was still expected to come from taxpayers.
Goodyear Blimp at 100: ‘Floating Piece of Americana’ Still Thriving
At 100 years old, the Goodyear Blimp is an ageless star in the sky. The 246-foot-long airship will be in the background of the Daytona 500 — flying roughly 1,500 feet above Daytona International Speedway, actually — to celebrate its greatest anniversary tour. Even though remote camera technologies are improving regularly and changing the landscape of aerial footage, the blimp continues to carve out a niche. At Daytona, with the usual 40-car field racing around a 2½-mile superspeedway, views from the blimp aptly provide the scope of the event.
Is U.S. Restaurants’ Breakfast Boom Contributing to High Egg Prices?
It’s a chicken-and-egg problem: Restaurants are struggling with record-high U.S. egg prices, but their omelets, scrambles and huevos rancheros may be part of the problem. Breakfast is booming at U.S. eateries. First Watch, a restaurant chain that serves breakfast, brunch and lunch, nearly quadrupled its locations over the past decade to 570. Fast-food chains like Starbucks and Wendy's added more egg-filled breakfast items. In normal times, egg producers could meet the demand. But a bird flu outbreak that has forced them to slaughter their flocks is making supplies scarcer and pushing up prices. Some restaurants like Waffle House have added a surcharge to offset their costs.
Load More