GameStop plans to sell $ 1 billion stock, stock slide

(Reuters) – GameStop Corp shares fell 12% on Monday after the video game retailer said it could sell shares worth up to $ 1 billion as it takes advantage of a dizzying rally in its shares this year, on behind a Reddit sales frenzy commercial frenzy.

The company said it will sell up to 3.5 million shares and use the proceeds to speed up the transition of its business model to e-commerce in a review led by top shareholder and board member Ryan Cohen.

At Thursday’s closing price of $ 191.45, the “market” sale could bring GameStop up to $ 670 million. However, the company is not required to sell shares at this value because market programs allow companies to sell shares for an extended period of time.

GameStop shares have gained more than 900% so far this year, giving the company a valuation of up to $ 34 billion at one time, while retailers bet against Wall Street hedge funds that shortened their shares.

Cinema operator AMC and airline American Airlines, which also benefited from the commercial frenzy fueled by Reddit in January, managed to sell shares, but GameStop was unable to do so due to regulatory restrictions.

GameStop has warned investors that buying shares in its offering could lead to a “significant” loss if the price of its shares falls.

The new market offering prospectus submitted to the US Securities and Exchange Commission replaces the one in December, in which GameStop registered to sell shares worth $ 100 million. The company said it did not sell any shares according to the December prospectus.

GameStop said Jefferies LLC is acting as a sales agent for the new offer at a commission of up to 1.5% of the gross selling price per share.

Separately, GameStop said global sales for the nine-week period ending April 4 increased by about 11%.

Its shares fell to $ 168.76 in premarket trading.