Why Shares Of GameStop Are Under Pressure Today?The stock made an attempt to settle below the $165 level.
GameStop Video 05.04.21.
GameStop Announced At-The-Market Equity Offering Program
Shares of GameStop found themselves under strong pressure at the start of today’s trading session after the company announced that it may sell up to 3.5 million shares.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
The company stated that it would sell its shares “at-the-market”. This move will allow it to capitalize on the interest of retail investors. After the news was released, GameStop stock made an attempt to settle below the $165 level but then rebounded back above the $180 level.
At current stock price levels, GameStop may get about $630 million from the share sale, although the actual result will likely be different from this figure as the stock is very volatile. The company stated that it will use the proceeds from the share sale to “further accelerate its transformation as well as for general corporate purchases and further strengthening of its balance sheet”.
What’s Next For GameStop?
GameStop had almost no chance to sell shares in a pre-arranged deal with professional investors at the current valuation so it decided to sell its stock via an “at-the-market” program.
The company has about 65 million shares outstanding, so the potential dilution is not significant. If the interest from speculative retail traders is strong enough, GameStop will have a decent chance to raise enough money for its goals.
Analysts remain skeptical about GameStop’s performance and do not expect that the company will be able to return to profitability in the next several years. However, the market may continue to ignore analysts’ earnings forecasts if retail traders’ interest in the stock remains high.
In fact, the share offering may ultimately serve as a bullish catalyst for the stock if traders believe that GameStop will successfully raise plenty of money and use it for its transformation. As usual, traders should keep in mind that GameStop shares are very volatile, so they should be prepared for fast moves.
For a look at all of today’s economic events, check out our economic calendar.