GameStop to Cash Out on Stock Craze, Will Sell Own Stock to Raise Capital

GameStop has announced that it will be selling up to 3.5 million of its own shares, thus finally taking advantage of the company's heightened stock price. This morning, GameStop announced that it has filed a prospectus supplement with the SEC that would allow the company to offer and sell up to 3.5 million ot its own common stock. GameStop plans to use the net proceeds from this sale to "further accelerate its transformation" and generally strengthen its balance sheet by adding liquidity to its balance sheet.

There are no specific dates when the sale will take place, but GameStop will likely want to move fast to take advantage of its heightened stock price. The company saw its stock rise from just under $20 a share to nearly $350 a share during a controversial stand-off between individual investors (most of whom were organized through Reddit) and hedge funds who had shorted GameStop's stock, basically betting that the company's stock price would continue to decline. As individual investors drove the price higher, they created a "short squeeze" which drove GameStop's stock even higher as those hedge funds were forced to buy GameStop stock in order to cover their own losses. Once trading apps and platforms limited trading on GameStop and several other companies, the buying frenzy calmed down, but GameStop's stock price still remains at around $180, over 900% its stock price at the beginning of the year.

While flooding the market with common stock will likely drive down GameStop's stock price (prices have dropped $15 since the sale was announced), the company still stands to potentially raise hundreds of millions of dollars from the sale. GameStop is seeking to bolster its e-commerce sales as it moves from a primarily brick and mortar business to an "omni-channel" model that services customers either in-store or online.