GameStop shares fall as it looks to sell $1B stock after Reddit surge

GameStop shares fall as it looks to sell $1B stock after Reddit surge

Shares in the American video game company, GameStop, have reportedly recorded a fall on Monday, 5th April 2021. The drop comes after the company’s announcement that it might sell up to $1 billion worth of stock.

The retailer attempts to make the best of the 900 per cent escalation in its shares owing to a Reddit-driven upsurge in 2021, state sources privy to the matter.

According to Thomas Hayes, the Chairman of Great Hill Capital, the positive side is that GameStop will have more money for investing in its digital revolution. However, the negative side is the massive dilution of the company, which would likely mean that the stock faces some pressure in the near-term, added Hayes.

As per a statement by GameStop, the company would sell almost 3.5 million shares. The proceeds of the transaction would be utilized for speeding up its transition to e-commerce in an overhaul that is being led by the billionaire Ryan Cohen, the company’s board member and its largest shareholder.

It is to be noted that shares of GameStop registered a sharp fall in pre-market trading in New York. However, the price saw a recovery by the close to $186.95, recording a fall of 1.9 per cent.

Back in January 2021, GameStop was at the heart of a trading frenzy, that lifted the company’s valuation to as high as $34 billion. This was witnessed as amateur investors signed up on online trading discussion groups, like Reddit’s r/wallstreetbets, for driving up stocks that were bet against by hedge funds.

Other organizations involved in the Reddit mania, comprising airline operator American Airlines and cinema operator AMC, have already sold shares for helping to finance their recoveries from the SARS-CoV-2 pandemic.

According to reliable reports, industry players expect Cohen to develop GameStop into an e-commerce juggernaut that can pose a challenge to bigger retailers such as Walmart, Amazon, and Target.

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Nandita Bhardwaj

Nandita holds a management degree with specialization in marketing, and boasts of a short-term experience in the field of recruitment. Following her passion for writing however, she decided to pursue a career in the field of content development. Presently, Nandita pens down news pieces for, spanning the verticals of business, finance, and technology.