(Reuters) – GameStop Corp shares fell 12% on Monday after the video game retailer said it could sell up to $ 1 billion in shares as it takes advantage of a soaring rally in its shares this year thanks to a retail sale. powered by Reddit. commercial frenzy.
The company said it would sell up to 3.5 million shares and use the proceeds to accelerate its business model shift to e-commerce in a review led by major shareholder and board member Ryan Cohen.
At Thursday’s closing price of $ 191.45, the “on-the-market” sale could take GameStop up to $ 670 million. However, the company is not required to sell shares at that value, as in-market programs allow companies to sell shares over an extended period of time.
GameStop shares have gained more than 900% so far this year, giving the company a valuation of up to $ 34 billion at a time as retail traders bet against Wall Street hedge funds that they had shorted their shares.
Movie theater operator AMC and airline operator American Airlines, which also benefited from the Reddit-fueled trading frenzy in January, were able to sell shares, but GameStop was unable to do so due to regulatory restrictions.
GameStop warned investors that buying shares in its offering could result in a “significant” loss if its share price falls.
The new market offering prospectus filed with the US Securities and Exchange Commission replaces one from December, in which GameStop had registered to sell $ 100 million worth of stock. The company said it had not sold any shares according to the December prospectus.
GameStop said Jefferies LLC acts as its sales agent for the new offering with a commission of up to 1.5% of the gross sales price per share.
Separately, GameStop said that global sales for the nine-week period ending April 4 increased about 11%.
Its shares fell to $ 168.76 in pre-market trading.
Report of Uday Sampath in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty