Source: Finance Association
① The ATM issuance model means that the company can freely decide when to issue new shares based on market demand and investor interest; ② Due to the latest news, Game Station's stock price has dropped nearly 70% from this week's high; ③ This self-created negative behavior has also been praised by Wall Street analysts.
Faced with speculative speculation in the market, the “retail investors shouted” concept leader$GameStop (GME.US)$Plans to issue new shares were announced on Friday, triggering a significant drop in stock prices while receiving praise from analysts.
Guided by the official release of negative losses, Game Station's stock price dived more than 20% on Friday, and the stock price has dropped nearly 70% from this week's high level of hype.
Do you like to stir fry? New shares are here!
As the starting point of this round of frenzied hype, the social media account “Roaring Kitty” (Roaring Kitty), which played a key role in the 2021 “Retail Battle Wall Street” incident, revived after a three-year slumber this Monday and posted a sketch that seemed to be intended to announce “we need to start getting serious.”
What comes to mind along with the slumber memories is the enthusiasm of the hype. GameStop's stock price rose 74% on Monday and soared 60% on Tuesday. After that, it continued to decline for the next two days, and the next was the performance time when the company personally finished on Friday.
GameStop submitted regulatory documents to the SEC on Friday, announcing the issuance of 45 million additional common shares by “issuing at market price” (commonly known as ATM issuance). When the full issuance is completed, the company's total share capital will rise to 351 million shares.
Unlike traditional IPOs, announcing an ATM offering does not mean that the company will immediately issue these 45 million shares. Instead, it is possible to issue new shares gradually and in batches according to current market prices according to market demand and investor interest. Affected by this news, GameStop's stock price fell more than 25% after opening on Friday, basically close to closing the gap that had jumped on the 13th.
As an additional document to issue new shares, Game Station also pre-disclosed the results for the first quarter of this year. Among them, revenue for the first quarter was between US$872 and US$892 million, compared to US$1.24 billion for the same period last year, and the market is expected to be around US$1 billion. The net loss for the first quarter was between 27 million and 37 million US dollars, which is narrower than last year's loss of 50.5 million US dollars.
Judging from the company's asset situation, Game Station is also not short of money. The company expects cash and equivalents to reach $1.1 billion by the end of the first quarter.
Analysts praise
Regarding the behavior of game stations, Peter Atwater, professor of economics at the College of William and Mary, commented that there are generally two periods to issue shares. One is when you have to do it, and the other is when it is too foolish not to issue new shares. If you are Ryan Cohen (the majority shareholder & CEO of GameStop), investors have just given you an opportunity to issue shares. The price is far higher than the previous transaction price, so it would be foolish not to take advantage of this opportunity.
In an ideal situation, if GameStation could actually release all of these 45 million shares, it would be able to raise close to 900 million US dollars at the current price. This will further strengthen the company's balance sheet and give Cohen more time to reverse business losses.
In recent years, as gamers' habits of buying physical games have gradually been replaced by buying digital versions online, the Game Station business has fallen into trouble. In March of this year, the company also announced plans to lay off employees and close the store, but did not disclose the exact scale.
Wedbush analyst Michael Pachter said that GameStop is currently unprofitable, and annual losses are expected to reach 100 million US dollars. They are now in a race to see if they can close stores fast enough to limit losses, but they don't have any plans to increase revenue or profits, and their core business is declining. Pachter gave Game Station a weaker rating than the general trend, and the target price was only $7.
editor/tolk