GameStop shares slumped 20% on Friday after the video game retailer announced a share sale to raise up to $3 billion even as its quarterly sales declined, in a surprise move ahead of a much-anticipated livestream by meme stock influencer Keith Gill.
Shares of the struggling company, which reported results four days ahead of schedule, fell nearly 23% to $36.16 before trading was halted several times for volatility.
The company said it would sell up to 75 million shares, but did not respond to a request for more details on the timing of the capital raise and the reason for the early release of its earnings report.
"There's an old saying: feed the ducks while they're quacking and certainly the ducks are quacking very loudly for GME right now," said Steve Sosnick, chief market analyst at Interactive Brokers.
"That's part of the reason why the company pushed its earnings date forward, because there were rules against selling stock ahead of a major corporate announcement like earnings."
The stock shot up nearly 50% on Thursday after Gill, popularly known among traders as "Roaring Kitty" and the key figure behind the eye-popping rally in GameStop shares in 2021, posted on YouTube about a livestream at 12 pm ET on Friday.
In 2021, Gill's championing of GameStop helped its shares rally by as much as 1,600% before they tumbled. He won a cult-like following among some investors and notoriety with others.
Gill has helped attract a flood of retail cash to the beleaguered bricks-and-mortar retailer with his bullish case on Reddit posts and YouTube streams where he often appeared wearing a bright red pirate bandana.
But after drawing congressional and regulatory scrutiny for his role in the extraordinary saga, Gill quickly disappeared, albeit much richer thanks to his GameStop investment, which at one point touched $48 million in value.
His apparent return has sent GameStop shares soaring in recent weeks. They rose nearly 150% since May 13, when an account on X linked to Gill began posting memes that some investors viewed as a sign of him being bullish on the company.
Just last month, GameStop said it made more than $900 million by selling 45 million shares as it took advantage of the revival meme-stocks rally.
"Strike while the iron is hot. AMC was applauded for making use of their stock price surge to clean up its balance sheet, so it's not surprising that GameStop would take a page from their playbook," said Brian Jacobsen, chief economist at Annex Wealth Management.
Theater chain AMC Entertainment, also a retail darling, completed a $250 million "at-the-market" share saleduring the meme-stock craze last month.
Other names associated with the meme stock phenomenon also fell on Friday, with AMC down about 5% and headphone maker Koss falling 11.2% after recording double-digit gains in the prior session.
NOT LIKE 2021
While the 2021 rally was fueled in part by retail investors banding together to punish hedge funds that had taken bearish positions in GameStop and other companies, some analysts said the same degree of fervor appears to be missing this time.
"Despite Keith Gill's renewed weekend appearance and ensuing GME price spike, retail traders do not look to be sticking around too long in the trade," analysts at Vanda Track wrote in a note earlier this week.
At the same time, Vanda said, "high-frequency institutional traders are front-running retail's efforts, and performance data demonstrate that this is indeed not turning into a widespread bullish phenomenon for the meme stocks cohort."
Short interest in the stock stood at 19.92% of free float, according to data and analytics company Ortex, which also noted a steady increase in bearish bets since last Friday when it was at 18.4%.
Broader market conditions do not reflect the same speculative energy as they did in 2021, said Jason Draho, head of Asset Allocation Americas at UBS Global Wealth Management.
The IPO market remains dormant, while M&A activity is mild, he said. "Meme stock activity isn't anywhere near it was in 2021, even though we are seeing dramatic one-day moves."
Results showed first-quarter net sales declined from year ago as GameStop struggles with customers turning to e-commerce firms for buying video games and collectibles.
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