GameStop Corp. GME is poised to cash in on its phenomenal price spike on exchanges, sparked by the much-acclaimed trading frenzy in recent months. This games retailer will sell up to 3.5 million shares and plans to use the proceeds to support its ongoing organizational transformation, as well as strengthen the balance sheet. Investors were not pleased with the announcement, however, as stocks began to fall in the pre-trading session yesterday. The stock finally closed down 2.4% on April 5.
In a separate statement, the company announced preliminary sales figures for the first nine weeks of fiscal 2021. Let’s take a closer look at these developments.
The supply of capital is a prudent move
GameStop will sell up to 3,500,000 shares of its common stock through a share offering program “on the market” (“ATM Offering”). The share offering will take place from time to time, through your sales agent, Jefferies LLC. Industry insiders say the company’s decision to sell shares will help it take advantage of the massive price spike seen since January due to potential shortage events. In particular, the company’s shares have soared 918.3% in the last three months compared to the industry’s increase of 39.9%.
Regarding the ATM Offering, the company did not provide a timeline for completing the program. Management noted that shares offered under this program will not exceed $ 1 billion in aggregate gross income. The net proceeds will be used to further accelerate your transformation, as well as for general corporate purposes and to strengthen your balance sheet.
We see that the company is making prudent efforts to accelerate growth, especially by expanding digital capabilities. To accelerate business transformation, GameStop has been restructuring its board of directors and has formed a Strategic Planning and Capital Allocation Committee. Since the formation of this committee, the company has appointed a number of board executives with significant experience in e-commerce, customer service, and technology. Additionally, the cash inflow through the latest share offering will further empower the company to undertake radical transformation initiatives. These moves are expected to help the company become a strong and digitally advanced player in the gaming industry.
Preliminary sales numbers look encouraging
GameStop recorded total global sales growth of nearly 11% during the first nine weeks of fiscal first quarter 2021 ending April 3, 2021 compared to the nine week period ending April 4, 2020.
In February, total global sales increased approximately 5.3%, for the four-week period ending February 27, 2021, compared to the four-week period ending February 29, 2020. In March, Total global sales increased approximately 18%, for the five-week period ending April 2, compared to the five-week period ending April 4, 2020.
Notably, the company has been able to achieve sales growth despite challenges related to the COVID-19 pandemic. Management noted that during the first nine weeks of fiscal 2021, the company witnessed limited operations, primarily in Europe, due to government-imposed restrictions driven by the pandemic. In addition, the company operated with a 13% drop in its store base, due to strategic store optimization efforts. In addition, the company reported that preliminary sales figures may change as they are subject to closing and adjustment processes.
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