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GameStop shares tumbled about 15 per cent in early trading on Friday after the games retailer brought forward its quarterly earnings and moved to take advantage of its renewed meme stock fame to offer up to 75mn new shares for sale.
The struggling group, which has not reported an annual operating profit since 2019, has seen its shares rocket more than 150 per cent since the apparent return in mid-May of Keith Gill, who goes by Roaring Kitty on various social media platforms, and who became famous in 2021 for his belief in the company during the meme stock craze.
On Friday GameStop reported a 29 per cent year-on-year drop in first-quarter sales, but a narrowing of net losses to $32.3mn from $50.5mn a year ago. Gains on investments have helped staunch losses from its challenged retail operations in recent quarters.
Both figures were in the middle of ranges the company provided when it released preliminary results alongside the announcement in May of a separate capital raise.
Friday’s statement gave no management commentary on its underlying business performance. The company had been scheduled to release figures next week.
GameStop’s shares leapt 47 per cent on Thursday after Roaring Kitty’s YouTube channel alerted followers to a live-streaming event at midday on Friday, US east coast time. So far Gill has not explained his return after a three-year hiatus. Last weekend he posted screenshots of his apparent holdings in the company.
An updated screenshot posted to Gill’s Reddit account late on Thursday showed holdings of stock and options worth $557mn.
Last month, GameStop sold 45mn new shares, pulling in $933mn, after Gill’s initial return sent the stock sharply higher. It reported cash of $999mn in the first quarter before the new funds. It has minimal debt.
Were it to sell the new shares at Thursday’s closing price of $46.66, which gave it a market capitalisation of $14.3bn, it would raise $3.5bn.
Average trading volumes in GameStop have soared seven-fold since the return of Roaring Kitty compared with levels this year before that point. They have been concentrated on days when Gill’s social media accounts have posted something new.
Retail interest in the stock appears to be waning, some trackers of the sector have warned. About $18mn worth of retail purchases of the stock were made on Monday, followed by just $3.1mn on Tuesday, according to data from VandaTrack.
“We estimate that retail traders accounted for about 11 per cent of all [GameStop] turnover between Monday and Tuesday,” Vanda said in a note on Wednesday.
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