GameStop Corp said on Tuesday it may sell new shares this year, to take advantage of a more-than 800 per cent run-up since January in the stock price of the US video game retailer at the centre of the Reddit rally of "meme stocks."
GameStop shares gyrated after hours and were last down 12 per cent. The company made the comments about the share offering in a regulatory filing for fourth-quarter earnings which showed GameStop returned to profitability, with 175 per cent growth in e-commerce sales.
Grapevine, Texas-based GameStop's shares have skyrocketed this year as retail traders bet against Wall Street hedge funds that had shorted the stock. The company's valuation surged as high as $33.68 billion (€28.42 billon), more than Best Buy Co Inc.
Many market pundits have urged GameStop to take advantage of its vastly increased share price to sell new shares.
However, the company decided it was restricted under US financial regulations from selling shares because it had not yet updated investors on its earnings, Reuters reported last month.
E-commerce transition
This was despite GameStop having already registered with the US Securities and Exchange Commission (SEC) in December to sell $100 million worth of stock through an at-the-market offering (ATM).
This would now no longer be an impediment after the company reported its fourth-quarter earnings.
"Since January 2021, we have been evaluating whether to increase the size of the ATM program and whether to potentially sell shares of our Class A Common Stock under the increased ATM Program during the course of fiscal 2021, primarily to fund the acceleration of our future transformation initiatives and general working capital needs," GameStop said in a regulatory filing.
Top shareholder Ryan Cohen, the billionaire co-founder of online pet supplies retailer Chewy, is trying to transition the company into an e-commerce business that can take on big-box retailers such as Target and Walmart, as well as technology firms such as Microsoft Corp and Sony Corp .
He faces an uphill battle as more consumers move to downloading games digitally or streaming through services such as Google Stadia.
Since his arrival, the company has seen two top executives depart, including chief financial officer Jim Bell.
Product offerings
GameStop has brought on board new faces too. It said on Tuesday it appointed former Amazon executive Jenna Owens as Chief Operating Officer in March.
GameStop said it would spend 2021 improving the speed of its delivery services, expanding its product offerings and hiring people experienced in e-commerce.
Investors looked past a ninth straight quarter of decline in overall sales, partly helped a nearly three-fold jump it reported in global e-commerce sales in 2020.
Net sales fell to $2.12 billion in the fourth quarter, the ninth straight quarter of declines. Analysts on average had expected $2.21 billion, according to IBES data from Refinitiv.
Adjusted net income rose to $90.7 million, or $1.34 per share from $83.8 million, or $1.27 per share, a year earlier.
