05 april 2021
17:38
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The price of the GameStop share, which is extremely popular with small investors, is falling sharply. The shaky American computer game salesman sets out to raise fresh capital.
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What do you do as a manager if you know that your share is trading at sky-high prices but that your finances are not so rosy? Issue shares, of course. It is an easy and inexpensive way to restore balance to health. The market had been on a major issue of GameStop for weeks
calculated. Now the time has come: the company will issue up to 3.5 million new shares to accelerate its transformation. The chain is strong with physical stores, but is lagging behind in e-commerce.
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At the current exchange rate, the operation could yield $ 640 million. But with high demand and rising prices, GameStop can raise up to $ 1 billion, making it one of the largest retail sector capital increases ever. The Jefferies stock exchange is supervising the operation. The capital increase takes place according to a special method. It is a so-called ‘at the market’ program. This means that GameStop may immediately sell the new shares on the market for a period of time. Most capital increases are done through a central order book, after which all new shares are immediately allocated and can be traded.
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It is GameStop’s second capital increase in a short period of time. Jefferies already supervised a share issue in December, but it is ten times larger.
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Reddit investors
The procedure followed makes it clear that GameStop is targeting retail investors. The stock took to the skies when tens of thousands of private investors rallied through the popular chat platform Reddit to drive away shorters – professional investors who speculate on lower prices – through their purchases. They did so successfully. The share price is still ten times higher than at the beginning of this year. The shorters took sky-high losses.
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The stock is still extremely popular. It has also been in the top ten of most traded stocks for months among European online brokers. In the first ten minutes after the opening bell on Monday, nearly 3 million pieces changed hands. The price plunged almost 10 percent lower, but afterwards the loss was more limited.
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At current prices, it is a good thing that GameStop is raising money. The company can then go on a takeover hunt to fill in the gaps in its business.
Joe Feldman
Analist Telsey Advisory Group
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From a business point of view, the capital increase makes sense. ‘At current prices, it is a good thing that GameStop is raising money. The company can go on a takeover hunt to fill the gaps in its business, ”said Telsey Advisory Group analyst Joe Feldman. ‘You can buy almost anything with cash. Few will sell their company in exchange for overvalued shares. ‘
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Internettoppers
GameStop hired a few top players from internet giants like Amazon in recent weeks to give e-commerce a boost. The company appointed, among other things, a chief growth officer and a chief technology officer.
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Investor awareness also appears to be good news for business. GameStop announced in response to the capital increase that sales were up 11 percent in the first nine weeks of 2021. Last month, the Dallas company published a disappointing fourth quarter.
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