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GameStop shares cut losses after the Reddit favorite plans a $1 billion stock sale

John Smith | Corbis News | Getty Images

Shares of GameStop tumbled by double digits on Monday after the video game retailer said it may sell up to $1 billion worth of additional shares following a historic Reddit-fueled short squeeze.

GameStop saw its stock drop more than 10% to around $171 apiece after announcing a stock offering of up to 3.5 million shares. The company said it intends to use the proceeds to further accelerate its e-commerce transformation as well as for general corporate purposes and further strengthening its balance sheet. 

The offering is viewed as a way for the retailer to capitalize on its recent jaw-dropping rally prompted by a band of Reddit-obsessed retail traders who targeted heavily shorted stocks. GameStop surged 400% in a week in January to above $400 a share amid the massive short squeeze.

At the very beginning of the year, GameStop, a brick-and-mortar retailer, traded at less than $20 a share.

GameStop is in the middle of a technology and e-commerce transition led by activist investor and board member Ryan Cohen, who was Chewy’s co-founder. The company hired former Amazon and Google executive Jenna Owens as its new chief operating officer.

In a separate release on Monday, GameStop said its total global sales increased about 11% for the first nine-weeks of fiscal 2021 from the same period a year ago. For the five-week period ended April 2, total global sales grew 18% year-over-year, the company said.

Two weeks ago, the company reported worse-than-expected fourth-quarter results which missed on the top and bottom lines. However, GameStop said its e-commerce sales jumped 175% last quarter and accounted for more than a third of its sales in the period.

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