The video game retailer announced that it plans to sell 3.5 million shares to drive digital transformation, but shareholders were not playing along.
News that GameStop (NYSE: GME) is going to sell $1 billion worth of its shares sent the company’s stock down 2.4% on Monday. The Texas-based company is looking to use the proceeds to accelerate its e-commerce transformation as well as for general corporate expenses and to further strengthen its balance sheet.
GameStop is using the offering to capitalize on the company’s recent stock rally. Back in January, GameStop was in the middle of the short-squeeze drama which was led by retail investors who betted on popular stocks. Legions of investors took to Reddit to discuss driving up GameStop’s share price, which reached a record high of $483 during the buying frenzy, in a bid to disrupt hedge funds that were betting against the stock.
On Monday, GameStop also announced that it recovered part of its global sales operations, which was severely affected by the pandemic. During the first quarter of 2020, the company’s operations were impacted by store closures due to COVID-19 restrictions, but for the nine weeks ended on April 3, 2021, total global sales increased 11% year-over-year.
GameStop did not confirm the date of when the shares will be sold or the amount and said both will be dependent on a number of factors.
Why is GameStop moving into digital?
Back in March, the video game merchandiser appointed former Amazon and Google executive, Jenna Owens, as its operating chief to help the company look into its declining sales. Previously, GameStop had hired Ryan Cohen, the co-founder of Chewy.com, to lead the expansion of its e-commerce business.
GameStop has struggled to keep up with the digital market as free games and downloads have taken over the video game industry. Furthermore, a decline in shopping mall foot traffic has also caused the company’s sales to drop. This means that the company needs to make a big push into the e-commerce space to stand a chance in our digitally-driven world.