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Videogame retailer GameStop has filed for a 20 million share offering, triggering a stock price drop of more than 10%. The announcement came as the company reported lower-than-expected quarterly revenue, with renewed interest sparked by Roaring Kitty's return.
GameStop Files for 20 Million Share Offering
After reporting lower-than-expected second-quarter revenue due to customers' continuous migration to online shopping, videogame retailer GameStop announced on Tuesday that it has filed for an offering of up to 20 million shares, sending its stock tumbling by more than 10% in extended trading.
Reuters reports that the company's main business of selling new and old video game discs is seeing diminishing sales due to a move to digital downloads, game streaming, and e-commerce purchasing. This comes at a time when the company has been caught in a "meme stock" trading frenzy.
GameStop Plans to Use Funds for Growth and Acquisitions
GameStop has stated that it plans to utilize the funds from the offering "for general corporate purposes, which may include acquisitions and investments in a manner consistent with our investment policy."
In keeping with remarks made by CEO Ryan Cohen in June, the firm announced on Tuesday that it is also identifying stores for closure and expects to close more outlets than in previous years.
This time last year, Cohen forewarned of fierce rivalry in the game console industry.
Wedbush analysts said on Friday that the proliferation of streaming services presents GameStop with an almost insurmountable hurdle to its projected return to growth and that the business demonstrates a complete absence of strategy to join new growth-oriented categories.
Roaring Kitty's Return Sparks Stock Volatility
Shares of GameStop have been highly volatile this year, according to Yahoo Finance. This volatility followed the return of online stock influencer Roaring Kitty to X.com after a three-year absence, with a cryptic meme that was generally seen as a bullish signal for GameStop.
The 2021 surge in GameStop and other so-called meme stocks, driven by individual investors on Reddit's WallStreetBets forum, was mostly due to Roaring Kitty.
In comparison to $1.16 billion in the same period last year, GameStop's revenue for the quarter ending August 3 was $798.3 million. In a survey conducted by LSEG, two analysts predicted revenue of $895.7 million.
After losing $2.8 million, or 1 cent per share, the previous year, its net income increased to $14.8 million, or 4 cents per share. The company's selling and administrative expenses fell 16% in the quarter, which assisted with this.
