GameStop announced on Tuesday that it plans to issue up to 20 million shares, a move that saw its stock price plummet by over 10% in extended trading. This development followed a reported decline in second-quarter revenue, as consumer habits increasingly favor online purchases over physical stores. The well-known video game retailer, often at the heart of the “meme stock” phenomenon, has faced falling sales due to the industry’s shift towards digital downloads, game streaming, and e-commerce.
The proceeds from the share offering are earmarked for “general corporate purposes, which may include acquisitions and investments in a manner consistent with our investment policy,” according to GameStop. Additionally, the company indicated further store closures are on the horizon, aligning with previous statements from CEO Ryan Cohen, who has also highlighted the fierce competition in the gaming console market.
Analysts at Wedbush recently expressed skepticism about GameStop’s potential for recovery, citing the growth of streaming services and noting the company’s lack of strategy for entering new growth markets. This analysis follows renewed interest in the company from online stock influencer Roaring Kitty, who returned to X.com after a three-year break, posting a cryptic meme that many interpreted as a positive sign for GameStop. Roaring Kitty had been a central figure in the 2021 surge of GameStop and other meme stocks, driven by individual investors on the Reddit forum WallStreetBets.
For the quarter ending August 3, GameStop reported revenues of $798.3 million, a significant drop from $1.16 billion the previous year and below the $895.7 million anticipated by two analysts surveyed by LSEG. Despite the lower revenue, the company did see some financial improvement, posting a net income of $14.8 million, or 4 cents per share, helped by a 16% reduction in selling and administrative expenses. This compares favorably to a loss of $2.8 million, or 1 cent per share, from the same quarter last year.