GameStop spooks investors with share sale, results ahead of "Roaring Kitty" livestream
Technology
GameStop spooks investors with share sale, results ahead of "Roaring Kitty" livestream
(Reuters) - GameStop posted a decline in quarterly sales and said it would sell up to 75 million shares, in a surprise move on Friday ahead of a much-anticipated livestream by meme stock influencer Keith Gill.
Shares of the struggling video game retailer opens new tab, which reported results four days ahead of schedule, tumbled 20% to $36 before the bell. It was the most-traded stock across U.S. exchanges with more than 40 million shares changing hands as of 8:53 am ET.
Gill, popularly known among traders as "Roaring Kitty", the key figure behind the eye-popping rally in GameStop shares in 2021, posted on YouTube about a livestream scheduled for 12 pm ET.
That sent GameStop shares up more than 47% in the previous session. But they tumbled on Friday after the company announced plans to raise more than $3 billion through a share sale.
Results showed first-quarter net sales declined from year ago as GameStop struggles with customers turning to e-commerce firms for buying video games and collectibles.
"Every time Roaring Kitty pumps up the stock, they get a spike that they can use to raise more equity and dilute shareholders," said Thomas Hayes, chairman at Great Hill Capital LLC in New York.
"So this is an AMC part two - a secularly declining business with sporadic retail interest from time to time."
Gamestop did not immediately respond to a request for more details on its results, which was released four days in advance without giving a reason.
Just last month, GameStop said it made more than $900 million by selling 45 million shares as it took advantage of the revival meme-stocks rally last month.
In 2021, Gill's championing of GameStop helped its shares rally by as much as 1,600% before they tumbled. He won a cult-like following among some investors and notoriety with others.
His apparent return sent GameStop shares soaring in recent weeks. They rose nearly 150% since May 13, when an account on X linked to Gill began posting a series of memes that some investors viewed as a sign of him being bullish on the company.
GameStop rose 21% on June 3 after Gill's Reddit account posted a screenshot showing a $116 million bet on the stock. The post showed a position of 120,000 GameStop June 21 call options at a strike price of $20, worth $65.7 million at last Friday's close.
Other names associated with the meme stock phenomenon also fell on Friday, with AMC Entertainment (AMC.N), opens new tab down 8.5% and headphone maker Koss (KOSS.O), opens new tab falling 15.8% after recording double-digit gains in the prior session.
NOT LIKE 2021
While the 2021 rally was fueled in part by retail investors banding together to punish hedge funds that had taken bearish positions in GameStop and other companies, some analysts said the same degree of fervor appears to be missing this time.
