GameStop shares tumble as company says it could sell shares to fund transformation

Investors finally get a glimpse into GameStop’s fundamentals after a Reddit-fueled trading frenzy earlier this year.

Here’s what the company did after the bell on Tuesday.

• He released quarterly results that missed Wall Street estimates.
• In its latest management reshuffle, the company has appointed Jenna Owens, former head of Amazon and Google, as the new chief executive.
• And in a hint at the transformation that has some investors excited for the action, the company said global e-commerce sales jumped 175% in the last quarter and accounted for more than a third of its sales in the last quarter. period.
• GameStop also admitted in a filing that it was considering selling additional shares.

The stock initially traded higher after the bell, but last fell around 7%, with traders likely reacting to news of the potential stock sell-off, an action that many investors and Analysts said it was cautious given the stock’s surge fueled by Reddit.

“As of January 2021, we are evaluating whether to increase the size of the ATM program (in the market) and whether to potentially sell shares of our Class A common stock as part of the increased ATM program during the course of the year. ‘fiscal year 2021, primarily to fund the acceleration of our future transformation initiatives and general working capital requirements, “the company said.” The timing and amount of sales under the ATM program would depend on, among other things factors, our capital requirements and alternative sources and costs of capital available to us, market perceptions about us and the current price of our Class A common shares. “

For the period ended January 2021, GameStop earned $ 1.34 per share on revenue of $ 2.12 billion. Wall Street expected GameStop to post earnings per share of $ 1.35 on revenue of $ 2.21 billion, according to Refinitiv’s average of the six analysts who cover GameStop.

This is GameStop’s first quarterly adjusted earnings since the fourth quarter of last year. GameStop’s fourth quarter profits typically represent the majority of the company’s annual profits, boosted by vacation sales. GameStop’s same-store sales increased 6.5% in the last quarter.

“We got off to a good start in 2021 as same store sales in February increased 23%, driven by continued strength in global computer hardware sales. ultimately, digital and e-commerce initiatives while continuing to run our core business during this emerging console cycle, ”said George Sherman, CEO of GameStop, in the earnings release.

The company said it continues to suspend advice.

Tuesday’s results mark GameStop’s first quarterly report since the GameStop trading mania in January.

In January, an epic short squeeze on GameStop’s action shocked Wall Street and drew attention to an emerging class of retail investors on social media platforms like Reddit. GameStop’s stock price skyrocketed to $ 483 per share, and subsequently lost 90% of its value. The controversy has caught the attention of Wall Street and Washington.

Since GameStop’s rise and fall in January, the stock has continued to climb, with stocks rising nearly 70% this month. GameStop’s stock grew by over 860% in 2021.

GameStop has a market cap of nearly $ 14 billion, more than 10 times the stock’s $ 1.3 billion market value at the end of last year. A year ago, GameStop’s market cap was $ 245 million.

GameStop shares have traded positively on new developments in the company over the past five months, such as the appointment of Chewy co-founder Ryan Cohen to GameStop’s board of directors and the focus on technology and GameStop e-commerce transition.

Earlier this month, GameStop announced that it had brought in Cohen to lead its transition to ecommerce. Cohen is chairman of a special committee formed by GameStop’s board to help with its transformation. Board members Alan Attal, former chief operating officer of Chewy, and Kurt Wolf, chief investment officer of Hestia Capital Management, also sit on the committee.

The committee has already appointed a chief technology officer, hired two executives to lead customer services and e-commerce execution, and began the search for a new chief financial officer with experience in technology or e-commerce. . GameStop previously announced that current CFO Jim Bell will step down on March 26. Citing sources familiar with the matter, Business Insider reported that Bell was kicked out by Cohen.

GameStop announced on Tuesday that its director of clientele, Frank Hamlin, would be stepping down.