GameStop (NYSE:GME) has raised $2.137 billion through an “at-the-market” equity offering. The move is a positive step, as it will provide the company with more financial flexibility amid ongoing challenges in the discretionary retail sector. However, its stock was down 2.26% in after-hours trading on Tuesday, June 11, as it sold shares at a discount.
It’s worth noting that the company sold 75 million shares under the program. This implies that the company sold shares at an average price of about $28.49 each, which is about 6.6% lower than its closing price of $30.49 on June 11.
The company, which retails video games and related products, intends to use the proceeds for general corporate purposes, including acquisitions and investments.
GME Stock Skyrockets
GameStop’s stock has experienced remarkable gains, climbing nearly 74% year-to-date. This notable increase was influenced by a livestream from Keith Gil, a prominent meme stock influencer. Gil’s influence and the subsequent social media buzz contributed significantly to the stock’s upward momentum despite the company’s ongoing financial struggles.
For example, GameStop’s top line fell about 28.7% in the first quarter of Fiscal 2024 as the elevated interest rate environment and macro headwinds continued to impact consumer discretionary spending and, in turn, sales. GME’s Q1 adjusted net loss was $36.7 million, or $0.12 per share.
Is GME a Good Stock to Buy Right Now?
The equity offering provides GameStop with more financial flexibility, which will help the company pivot toward new growth opportunities through acquisitions or investments. However, GameStop stock remains highly volatile, which can lead to significant losses.
Given the ongoing challenges, Wedbush analyst Michael Pachter gave a Sell rating on GME stock on June 7. His price target of $13.50 implies about 55.7% downside potential from current levels. Pachter has a 41% success rate on GME stock.
