NEW YORK (BLOOMBERG) – GameStop climbed on Tuesday (June 22) after completing an at-the-market (ATM) offering programme by selling five million shares for a total of US$1.13 billion (S$1.5 billion) via Jefferies.
Shares of the video-game retailer rose 10 per cent to US$220.40 after the announcement. It will use net proceeds from the offering to invest in growth initiatives and maintain a strong balance sheet, the company said in a statement on Tuesday.
GameStop is one of the Reddit-driven “meme” stocks that have soared this year. As retail traders have helped drive share prices of the so-called meme stocks higher, it has been the companies that have benefited, said Mr Greg Taylor, chief investment officer at Purpose Investments.
“It’s been a lifesaver for a lot of these companies,” Mr Taylor said in an interview, with firms taking advantage of moves in their stock prices to raise cash and fix their balance sheets and operations. “These were businesses that were really under pressure.”
GameStop’s shares were sold for an average of US$225.20, based on a Bloomberg calculation, above the stock’s 50-day moving average of US$193.09.
The total amount of shares sold represents the full capacity of its ATM authorisation. It had announced on June 9 that it planned to sell as much as five million shares via an ATM offering.
An ATM offering deploys the historically unusual strategy of selling shares directly into the open market. Traditional stock offerings are sold almost entirely to institutional investors, but the rise of retail trading is leading corporate issuers with large followings among day traders like GameStop to cater their financings to go directly to individuals.
It is the second time this year that GameStop tapped equity markets after raising US$551 million in April. Meme stocks have been using ATM offerings to raise capital because they target the retail investors who have been driving up shares in the open market.
This is the latest ATM offering following similar programmes by day-trader favourites like AMC Entertainment Holdings, Express Inc, Castor Maritime, Torchlight Energy Resources and Novavax over the past few weeks alone.
Despite a sharp retrenchment since June 9, it is still up more than 1,000 per cent this year. Activist investor Ryan Cohen has built a 13 per cent stake in GameStop and is leading an effort to transform the video-game retailer into an e-commerce powerhouse, away from its brick-and-mortar roots.
The unusual trading of GameStop and others has drawn the interest of the Securities and Exchange Commission (SEC).
GameStop said earlier this month that it received a request from the agency’s staff for “voluntary production of documents and information concerning an SEC investigation into the trading activity in our securities and the securities of other companies.” GameStop does not expect the inquiry to adversely affect the company.
Some other meme stocks also rose on Tuesday, with Clover Health Investments climbing 12 per cent, while Express gained 11 per cent and AMC Entertainment advanced 4.6 per cent.