GameStop plans to cash in on trading frenzy $1bn with share sale

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The online traders who have turbocharged shares in GameStop have brushed off the video game retailer’s plans to cash in on the surge by raising up to $1bn (£720m), with shares recovering from a heavy slump yesterday.

GameStop planned to sell up to 3.5m shares over time, which it said would help fund a digital turnaround and strengthen its balance sheet. The news sent shares falling by as much as 14pc but they swiftly recovered, as GameStop revealed that it had started to recover from a long sales slump.

The US retailer revealed sales increased 11pc year-on-year in the nine weeks to April 4, and by 18pc in the last five weeks. It has been at the centre of an online trading community known as WallStreetBets that has sought to push up shares in struggling companies, sometimes by forcing short sellers betting against a company’s shares to close their positions.

Shares have risen from around $17 at the start of the year to $181 yesterday, giving it a market value of about $12.8bn, despite sales declining since 2017, the last year it made a profit. Many analysts expected GameStop to take advantage of what was seen as an artificially high share price to sell shares.

Yesterday, it said it planned to sell shares in an “at the market” offering, in which a broker gradually sells into the market over time. The sales would net around $650m at current prices but the firm said the maximum proceeds would be no more than $1bn should its share price rise further, a sum that would treble its existing cash holdings. Other companies caught in WallStreetBets mania, including cinema chain AMC and American Airlines, have sold stock, but GameStop has so far resisted.

Shares plummeted as trading opened but recovered to trade roughly flat as the company also revealed encouraging sales figures owing to the gradual lift of lockdowns and the arrival of new games consoles at the end of last year.

The 11pc sales rise since February compares to a 21pc dip last year. GameStop, hit hard by the rise of digital game downloads and Covid-induced store closures, committed to an online-centred recovery, hastened by pressure from activist investor Ryan Cohen.