GameStop spooks investors with share sale, results ahead of “Roaring Kitty” livestream
:GameStop posted a decline in quarterly sales and said it would sell 75 million shares, in a surprise move on Friday ahead of a much-anticipated livestream by meme stock influencer Keith Gill.
Shares of the embattled video game retailer, which was expected to report results on June 11, fell almost 10 per cent before the bell.
Gill, the online stock influencer known as “Roaring Kitty”, a key figure behind the eye-popping rally in GameStop shares in 2021, posted on YouTube he would host a livestream at 12 pm ET.
That sent GameStop shares up more than 47 per cent in the previous session. But they tumbled after the company on Friday announced plans to raise more than $3 billion through a share sale.
Its first-quarter net sales declined as it grapples with customers turning to e-commerce firms for buying video games and collectibles.
“No matter how much noise somebody makes on whatever platform, at some stage the company will have to generate profits and particularly cash flow to sustain that valuation,” said Russ Mould, investment director at AJ Bell.
“The question that everybody needs to ask is has anything fundamentally changed about the company’s competitive position in the last month?”
In 2021, Gill’s championing of GameStop helped its shares rally by as much as 1,600 per cent before they tumbled. He won a cult-like following among some investors and notoriety with others.
His apparent return sent GameStop shares soaring in recent weeks. They rose nearly 150 per cent since May 13, when an account on X linked to Gill began posting a series of memes that some investors viewed as a sign of him being bullish on the company.
GameStop rose 21 per cent on June 3 after Gill’s Reddit account posted a screenshot showing a $116 million bet on the stock. The post, the first from the account in three years, showed a position of 120,000 GameStop June 21 call options at a strike price of $20, worth $65.7 million at last Friday’s close.
Other names associated with the meme stock phenomenon also fell on Friday, with AMC Entertainment and headphone maker Koss down more than 10 per cent after recording double-digit gains in the prior session.
NOT LIKE 2021
While the 2021 rally was fueled in part by retail investors banding together to punish hedge funds that had taken bearish positions in GameStop and other companies, some analysts said the same degree of fervor appears to be missing this time.
“Despite Keith Gill’s renewed weekend appearance and ensuing GME price spike, retail traders do not look to be sticking around too long in the trade,” analysts at Vanda Track wrote in a note earlier this week.
At the same time, Vanda said, “high-frequency institutional traders are front-running retail’s efforts, and performance data demonstrate that this is indeed not turning into a widespread bullish phenomenon for the meme stocks cohort.”
Short interest in the stock stood at 19.87 per cent of free float, according to data and analytics company Ortex.
Broader market conditions do not reflect the same speculative energy as they did in 2021, said Jason Draho, head of Asset Allocation Americas at UBS Global Wealth Management.
The IPO market remains dormant, while M&A activity is mild, he said. “Meme stock activity isn’t anywhere near it was in 2021, even though we are seeing dramatic one-day moves.”
