GameStop, the video game retailer, has reported a significant decline in sales in its latest quarterly financial results.
Despite these challenges, the company announced a major stock offer, potentially raising over $3 billion.
This announcement, made ahead of its originally scheduled date of June 11, coincided with a surge in trading activity following activity by meme stock influencer Keith Gill, also known as “Roaring Kitty.”
The early release came just before a highly anticipated livestream from Gill, who had previously supported the stock and recently reappeared on the scene.
GameStop’s reliance on physical stores has been detrimental as consumer preferences shift toward online purchasing of games and collectibles.
This shift was reflected in the company’s reported net sales of $881.8 million, a decrease from $1.24 billion in the previous year, and below the market expectations of $995.3 million, as estimated by two analysts from LSEG.
The company has been unprofitable since the fiscal year ending in February 2018, a trend attributed to the growing popularity of online gaming.
“The odds of them returning to profitability on operating basis are nil…they don’t have anything that they can do to turn around their core business,” commented Wedbush analyst Michael Pachter.
Despite a reduced net loss of $32.3 million down from $50.5 million a year earlier, GameStop’s adjusted loss per share widened to 12 cents, missing the expected 9 cents.
“The business model for GameStop is looking increasingly fragile to me, as it relies on people visiting physical stores whereas customers now are more likely to be looking to purchase games and the like online,” said Stuart Cole, head macro economist at Equiti Capital in London.
The buzz around Gill’s return has led GameStop to announce the sale of up to 75 million shares, following a successful raise of nearly $933.4 million from a previous sale of 45 million shares.
Since Gill’s post on the social media network X on May 13, GameStop shares have surged in value.
Pachter noted, “They are taking advantage of the recent spike in share price to issue shares, which is a prudent move that takes advantage of the frenzy created by Roaring Kitty.”