GameStop Corp shares fell 12% on Monday after the video game retailer said it could sell shares worth $1 billion as it takes advantage of the confusing rally in its stock this year behind the madness of retail trading driven by Reddit.
The company said it would sell up to 3.5 million shares and used results to accelerate the shift in its business model to e-commerce in an improvement led by the top shareholder and board member Ryan Cohen.
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At the closing price of Thursday, $191.45, the sale of “at-the-market” can take GameStop up to $670 million. The company, however, is not obliged to sell shares at these values because programs on the market allow the company to sell shares over a long period. GameStop shares have risen more than 900% so far this year, giving the game retailer a valuation of $34 billion at one point as retail traders bet against Wall Street hedging funds that had shortened their shares.
AMC film theater operators and American airline operators, who benefited from Reddit frenzy-fueled trading in January, could sell shares. Still, GameStop could not do it because of regulatory restrictions. Meanwhile, the company warned investors that the purchase of shares in its offerings might produce “significant” losses if the stock price decreases.
The new at-the-market offering submitted with the US Securities Commission and Exchange replaced one from December, where GameStop had registered to sell shares worth $ 100 million. The company said it had not sold shares under the December prospectus.
GameStop said Jefferies LLC acted as a sales agent for new offers on commissions up to 1.5% of the gross sales price per share. Separately, GameStop said global sales for the nine weeks ending April 4 rose by around 11%. The shares fell at $168.76 in premarket trading.
