GameStop Corp. GME shares are trading 16.17% lower in the early pre-market session at $160.50 on Monday.
What Happened: The dip follows the gaming retailer announcing plans to sell up to 3.5 million shares in an “at-the-market” equity offering through Jefferies LLC.
GameStop disclosed the plan in a prospectus filed with the U.S. Securities and Exchange Commission. The shares planned for the offering account for about 5% of the outstanding shares.
The retailer said it intended to use proceeds from the offering “for working capital and general corporate purposes,” alongside boosting its balance sheet, “which may include funding our transformation initiatives and product category expansion efforts, the repayment, refinancing, redemption or repurchase of our existing indebtedness, capital expenditures or the satisfaction of our tax withholding obligations upon the vesting of shares of restricted stock held by our executive officers and other employees.”
Why It Matters: GameStop shares have seen significant volatility this year amid a short squeeze led by retail investors, in particular those belonging to the Reddit group WallStreetBets.
The Texas-based company during the fourth-quarter earnings report had disclosed that it was mulling increasing the size of its at-the-market program, established in December.
GameStop acknowledged the fluctuations in the market price of its stock of late and cited “short squeezes” as a risk factor facing the company in the SEC filing, alongside uncertainty related to COVID-19.
GME stock has returned 916.2% year-to-date gains as of Thursday's close. It has a 52-week high of $483 and low of $2.57.
Besides GameStop, AMC Entertainment Holdings Inc. AMC, Rocket Companies Inc. RKT, and Sundial Growers Inc. SNDL are some of the other stocks that have seen high volatility this year amid the short squeeze frenzy.
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