Cold sweats on the stock market for GameStop

Posted on Apr 5, 2021, 4:30 PMUpdated on Apr 5, 2021, 6:10 PM

In the midst of a bitter speculative battle between Wall Street and private investors since the start of the year, the American video game distributor GameStop has felt growing wings. But the landing could be brutal. The title of the Texan company lost up to 14% on Monday in the first exchanges on the New York Stock Exchange, after the announcement of a massive capital increase. Sign of the feverishness around the value, it then made the yoyo in a bull market.

GameStop plans to raise up to $ 1 billion (847 million euros) by issuing a maximum of 3.5 million new shares. The operation is likely to strongly dilute the shareholders of the group, whose total market value reaches around 13 billion dollars. Hence its mixed reception, at this stage, on the markets.

This fundraising, coordinated by the investment bank Jefferies, is ten times larger than that of 100 million dollars envisaged in December, before the title is the subject of intense speculation. The ambition has been revised upwards to accelerate GameStop’s shift from traditional video game stores to e-commerce, under pressure from its first shareholder and director, Ryan Cohen.

The group, owner of the Micromania sign in France, also wants to take advantage of the immense wave of fervor to which it has been the object since “gamers” and other users of Reddit online forums took its defense against hedge funds adept at short selling. In January, this movement of revolt caused the price of GamesStop to jump by 1,600%, before a dizzying drop, all in just a few days. The title has since recovered and still shows a gain of 916% since the start of the year.

The issue of new shares announced on Monday will be done via an offer “ at market price ‘ (at-the-market equity offering). At last Thursday’s closing price, before the stock markets closed for Good Friday, GameStop could only have raised $ 670 million by issuing 3.5 million titles. For the moment, the company does not specify the timetable and the extent of its capital increase.

On the ground, GameStop, however, benefits from its newfound notoriety. Its sales grew 11% in the first nine weeks of the year, and 18% in March alone, on an annual basis.

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