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Meme stock GameStop soared nearly 20% in premarket trading on Tuesday after the struggling videogame retailer announced it had raised over $900 million from selling its shares during the market rally earlier this month.
Impact of “Roaring Kitty” and Market Rally:
GameStop surged nearly six times its value in the first two weeks of May, partly fueled by the online return of “Roaring Kitty” Keith Gill, a key figure in the 2021 retail trading frenzy.
However, the stock has since lost 70% of its value up to Friday’s close, taking GameStop’s market value to $5.82 billion.
The company stated it had raised $933.4 million after completing its disclosed offering for 45 million shares. It intends to utilize the proceeds for general corporate purposes, including acquisitions and investments.
Challenges in the Retail Market:
The brick-and-mortar retailer has been grappling with customers turning to e-commerce firms to buy video games and collectibles. Earlier this month, GameStop expected its first-quarter net sales to drop to $872 million and $892 million from $1.24 billion a year ago.
Tuesday’s move could hurt short sellers of GameStop’s shares, who bet on a stock’s decline. According to data from analytics firm Ortex Technologies, about 20.5% of GameStop’s publicly available shares were in a short position.
