The stock in GameStop (NYSE: GME) plunged 14% in early trading Monday after it announced plans to raise up to $1 billion via an "at-the-market" offering.
The video game retailer said in a filing today that it will sell no more than 3.5 million of common stock. The stock total represents roughly 5% of 69.9 million it has outstanding.
Based on Thursday’s closing price of $191.45 per share, GameStop could raise $670.1 million. GameStop has yet to set a price range as its shares have seen extreme volatility over the past few months amid the battle between hedge funds and retail investors. Since Jan. 11, GameStop has traded anywhere from $19.94 and $347.51 per share.
Currently, GameStop holds a market capitalization of around $11.5 billion. Even at today’s dip, GameStop isn’t worth buying at its current levels, when considering its weak fundamentals. Sales have been declining well before the pandemic, as GameStop has failed to keep up with the competition in the digital space. But GameStop has rallied this year thanks to a Reddit mob tormenting hedge funds by driving up its stock price in a short-squeeze.
As a result, GameStop is trying to take advantage by selling stock at its high valuation.
Another heavily shorted company AMC (NYSE: AMC), has executed a similar approach. In March, executives at the world’s largest movie chain sold $3 million worth of stock.
GameStop plans on using the funds from the offering to bolster its balance sheet, accelerate its transformation process, as well as general corporate purposes.
Jefferies LLC is acting as the sales agent on the deal.
After the short-squeeze rally, investors hope Ryan Cohen, an activist investor and the co-founder of Chewy (NYSE: CHWY), who joined GameStop’s board earlier this year, will be able to successfully shift the company’s business model over to e-commerce.