GameStop shares fall after it announces plan to sell $1bn in stock

GameStop shares fell sharply on Monday after the video game retailer announced it may sell up to $1bn of additional shares as it looks to take advantage of a Reddit-driven trading frenzy earlier this year.

The Texas-based company said it might offer and sell up to 3.5m of its shares, with the proceeds used to “accelerate its transformation” and shore up its balance sheet.

“The timing and amount of any sales will be determined by a variety of factors,” said GameStop in a statement.

Shares of the video game retailer declined more than 19 per cent in pre-market trading in New York. though they were just 8 per cent lower after the open at $176.

In January, the company was at the centre of a share-selling frenzy, led by US amateur investors, who bet on popular stocks such as GameStop and carmaker Tesla.

The co-ordinated effort by users of the online forum Reddit drove up the share price of GameStop to a record high of $483 and was designed to turn the screw on short-sellers.

In a separate announcement on Monday, GameStop revealed a recovery in its global sales operations, which had been knocked by disruption from the pandemic.

For the nine weeks ending April 3 this year, total global sales were up about 11 per cent compared with the same period a year ago, the company said.

“During the first quarter of fiscal 2020 and due to the spread of Covid-19 around the world, the Company’s various operations across 14 countries were negatively impacted due to temporary store closures and other government-mandated restrictions that resulted in limited operations,” GameStop said.

The retailer announced in March that it had appointed Jenna Owens, a former Amazon and Google executive, as its new operating chief, part of a broader shake-up of its leadership team as it looks to stem a years-long decline in sales.

GameStop had already tapped Ryan Cohen, its largest shareholder and the co-founder of Chewy.com, to lead an expansion of its ecommerce business.

In the years leading up to the pandemic, GameStop’s sales had fallen as the company struggled to adapt to a newly digitised market, where downloads and free-to-play online games were dominant and shopping mall traffic declined.