Unlock the Editor’s Digest for free with Roula Khalaf, the Editor of the FT, as she selects her favourite stories in this weekly newsletter. GameStop shares took a hit as the struggling video game retailer announced plans for a new share sale, despite efforts by “meme stock” trader Roaring Kitty to support the stock. The shares closed almost 40 per cent lower, trimming the gains made since Roaring Kitty, real name Keith Gill, reemerged in mid-May.
In a YouTube livestream, Gill expressed his support for GameStop’s CEO Ryan Cohen, emphasizing that people should focus on Cohen’s ability to turn the company around. GameStop has been leveraging its popularity with retail traders to improve its financial position with repeated stock sales, and recently disclosed plans to sell an additional 75 million shares.
The publication of GameStop’s first-quarter financial results revealed a 29 per cent drop in sales and a narrowing of net losses from $50.5 million to $32.3 million. The company’s core business of selling game consoles, software, and collectibles has been declining, leading to a significant reduction in retail stores. Despite this, gains on investments have helped offset losses in recent quarters.
Last month, GameStop raised $933 million by selling 45 million new shares after Gill sparked a surge in the stock’s value through cryptic social media posts. With cash reserves of $999 million before the new funds, minimal debt, and the potential $2.1 billion from selling the new shares, GameStop’s financial position seems stable.
Screenshots of Gill’s $557 million position in GameStop stock and call options raised speculation about third-party funding. However, Gill clarified during the livestream that he was not working with anyone else and GameStop was his sole investment. Despite the decline in GameStop’s shares after Friday, they are still up around 60 per cent since Gill’s return in mid-May.
During the livestream, Gill, donning white sunglasses and several Band-Aids, humorously responded to the loss in his stock position. His playful demeanor and carefree attitude resonated with viewers, showcasing his unique approach to investing and the volatile nature of stock trading. While GameStop’s future remains uncertain, Gill’s unwavering support for the company and its leadership indicates potential for growth and recovery in the long run.
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