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Vladimir Zernov
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GameStop

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.

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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”.

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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.

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