GameStop Climbs 9% As RC Ventures Boosts Stake, Activist Pressure

GameStop (GME) soared 9% in Monday’s after-hours trading after activist RC Ventures ramped up the pressure on the embattled video game retailer.

RC Ventures disclosed that it now beneficially owns 6,500,000 GME shares, constituting approximately 9.98% of the outstanding common stock. That’s up from 9.6% previously.

The SEC filing also revealed that RC Ventures has had conversations with senior management and several members of the Board of Directors of GameStop over the course of this month concerning its views of the company.

“During these conversations, the Reporting Persons [RC Ventures] expressed their willingness to become more involved in the Company under certain circumstances that [RC Ventures] believe are likely to produce the best results for all shareholders” the filing stated.

GameStop shares have surged 44% year-to-date- with a 26% rally in the last five days alone. However, GME shows a cautious Hold analyst consensus, with 2 recent buy ratings, vs 4 hold ratings and 2 sell ratings. Meanwhile, due to the recent rally, the average analyst price target of $6.38 indicates 27% downside potential lies ahead.

“While there are many reasons for us to become constructive on GameStop shares, investors must wait another several months to see how well the company performs” commented Wedbush analyst Michael Pachter recently.

“We believe management is executing nearly flawlessly in what had previously appeared to be a hopeless situation” he added.

However, for the time being, Pachter decided to reiterated his Hold rating on GME shares with an $8 price target. “Should we be right that the console launches can return GameStop to consistent profitability and free cash flow generation, we are prepared to revisit our investment thesis” the analyst told investors on September 10. (See GME stock analysis on TipRanks)