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GameStop hopes to cash in on stock surge by selling millions of shares

House committee holds hearing on GameStop
House Financial Services committee holds hearing on GameStop stock drama 01:50

Two months after a market phenomenon took shares of GameStop to the moon, the video game retailer said Monday that it would sell up to 3.5 million of its shares with the price still vastly elevated.

Shares of the so-called meme stock fell as much as nearly 14% on the news, ending the day down 2% at $186.95. The Nasdaq rose 1.7% to $225.49, boosted by an optimistic jobs report on Good Friday. Gamestop said the shares will be sold through an "at-the-market" offering, which lets a publicly traded company raise capital over time.

A bizarre stand-off between hedge funds that had heavily shorted GameStop, betting that the price of shares would fall, and smaller investors who challenged them, sent shares of the beleaguered company soaring early this year.

Redditors use GameStop stock earnings to donate to children's hospitals 01:13

Market pundits had urged the company to put more shares on the market as the price of a share, which had hovered around $20 each, spiked close to $500. Such a stock sale would have allowed the company to pay down hefty debts that it had accumulated as a technology shift led gamers to spend money online, rather than in GameStop stores.

And two weeks ago, GameStop disclosed in a filing with the Securities and Exchange Commission that it had been considering such a sale since January.

Shares skyrocketed 1,625% in January as bands of smaller and novice investors communicating on social media hyped up the retailer's stock, putting pressure on hedge funds to sell in a "short squeeze" that only sent the stock price higher.

Share typically slide, however, when a share sale is announced because it can water down the value of shares already in investors' hands. That happened before the opening bell Monday, with shares sliding almost 16%. But a share still costs more than $161, meaning prices are still up nearly 900% this year.

The company, based in Grapevine, Texas, also said Monday that preliminary fiscal first-quarter global sales are up about 11% from a year ago, a period when the pandemic slammed the U.S. and retailers like GameStop were forced to close its stores.

For its latest fiscal year, GameStop reported a net loss of $215 million, an improvement on its 2019 loss of $471 million. Net sales for 2020 were nearly $6 billion, compared with $6.5 billion the previous year.

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