GameStop Corp. faced a downturn following the opening of filings that allowed for potential equity sales, exacerbating a decline that wiped out much of the rally driven by online hype, which had initially boosted the stock by 271% earlier in the week.
The stock plummeted by 20% on Friday as the video game retailer entered into an agreement to potentially offer up to 45 million shares and reported a decrease in preliminary first-quarter net sales.
This three-day retreat saw the stock lose over $8 billion in value, with its weekly gains reduced to 27%.
Wedbush analyst Michael Pachter, who holds an underperform rating on the stock, noted,
“GameStop is capitalizing on a recent spike in share price by prudently issuing shares at a premium, providing itself a greater level of reserves while it struggles to re-focus its business and reverse continuing operating losses.”
GameStop disclosed that its preliminary first-quarter net sales ranged between $872 million and $892 million, compared to $1.2 billion in the same period last year.
AMC Entertainment Holdings Inc., another company caught up in recent market volatility, saw a 5.2% decline. Earlier in the week, AMC had leveraged its stock surge to mitigate its debt by swapping shares and completing an equity offering.
The decrease in trading activity contributed to Friday’s market movements. Giacomo Pierantoni, head of data at Vanda Research, observed a significant decrease in retail investors’ purchases of GameStop and AMC.
While GameStop experienced modest inflows over the last two days, inflows into AMC were minimal on Thursday.
The resurgence of “Roaring Kitty,” the online persona of Keith Gill, reignited the latest rally, reminiscent of the frenzy in 2021.
However, compared to early 2021, options activity for GameStop has waned, and activity surrounding AMC shares has declined by more than half from its peak on Monday.
