GameStop Stock Surges Following $1 Billion Equity Sale
Investor Enthusiasm for Meme Stocks Drives GameStop Shares Up by 22%
GameStop (GME) shares saw a significant rise of up to 22% on Tuesday, following the announcement that the video game retailer successfully raised nearly $1 billion through its latest equity sale.
The stock opened at approximately $23, a notable decrease from the near $65 peak reached earlier this month during a brief meme stock rally.
This surge underscores the current investor enthusiasm for meme stocks—those that gain significant traction online, often becoming detached from their fundamental value, according to market strategists.
"If this were a normal market, people would be a little freaked out," Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance. "You don’t sell stock into the market if you think your stock is undervalued. You do it when you think your stock is overvalued."
GameStop remains a heavily shorted stock, with short interest exceeding 21% of its float.
Taking advantage of the mid-May meme stock surge, GameStop sold 45 million shares, raising approximately $933 million, as stated in a Friday announcement. The company plans to use the net proceeds for general corporate purposes, including potential acquisitions and investments.
The equity offering was initially disclosed on May 17, along with the company's preliminary financial results, which led to a 30% drop in shares that day.
Some Wall Street analysts viewed the stock sale as a strategic move amid GameStop's financial challenges. The company's latest earnings report revealed a significant decline in quarterly sales compared to the previous year.
GameStop's stock sale coincided with similar actions from fellow meme stock AMC Entertainment (AMC), which also raised $250 million by selling 72.5 million shares earlier this month. AMC shares increased by more than 2% on Tuesday.
GameStop's recent rally began on May 13, spurred by the online reappearance of "Roaring Kitty," a key figure in the 2021 meme stock phenomenon.
Also Read: GameStop Stock Soars Nearly 100% as Meme Stocks Make a Comeback
