GameStop shares fall as company looks to cash in on Reddit surge
Staff and agency, 05 April 2021
Shares in GameStop fell on Monday after the video-game retailer said it may sell up to $1bn (£720m) worth of stock as it tries to make the best of the 900% surge in its shares from a Reddit-driven rally this year.
The company said it would sell up to 3.5m shares and use the proceeds to speed up its shift to e-commerce in an overhaul being led by the billionaire Ryan Cohen, its biggest shareholder and a board member of GameStop. Shares in the company fell sharply in pre-market trading in New York but had recovered by the close to $186.95, a fall of 1.9%.
“The positive story is they’ll have more money to invest in their digital revolution, and the negative story is it’s massive dilution and would likely mean the stock faces some near-term pressure,” said Thomas Hayes, chairman of private equity investor Great Hill Capital.
GameStop was at the centre of a trading frenzy in January, which lifted its valuation to as high as $34bn, as amateur investors joined ranks on online trading discussion groups including Reddit’s r/wallstreetbets to drive up stocks that hedge funds had bet against.
