GameStop shares fall as company says it may sell stock to fund transformation

Tiffany Hagler-Geard | Bloomberg | Getty Images

After a trading frenzy fueled by Reddit earlier this year, investors are finally getting a glimpse of GameStop’s fundamentals.

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

  • Quarterly results were released that were missing Wall Street estimates.
  • In its recent executive reorganization, the company named former Amazon and Google CEO Jenna Owens as its new chief operating officer.
  • In a note of transformation that got some investors excited about the stock, the company said global e-commerce sales rose 175% in the most recent quarter, accounting for more than a third of its sales over the reporting period.
  • GameStop also confirmed in a filing that it is considering selling additional shares.

The stock initially traded higher after the bell, but recently fell about 7%, with traders likely responding to news of the potential stock sale. An action that many investors and analysts deemed prudent given the stock’s surge fueled by Reddit.

“Since January 2021, we have been examining, especially in the course of the 2021 financial year, whether the ATM program (on the market) should be enlarged and potentially shares of our ordinary shares of class A should be sold as part of the increased ATM program in order to accelerate our future transformation initiatives and the to finance general working capital needs, “the company said in a statement. “The timing and amount of sales under the ATM program depend, among other things, on our capital requirements and the alternative sources and costs of capital available to us, the perception of the market above us and the then current trading price of our Class A common shares.”

For the period through 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 sales of $ 2.21 billion, according to Refinitiv’s average among the six analysts who study GameStop.

This is GameStop’s first quarterly adjusted profit since the fourth quarter of last year. GameStop’s fourth quarter profits typically make up the bulk of the company’s annual profits, which is boosted by Christmas sales. GameStop’s sales in the same store rose 6.5% in the most recent quarter.

“We got off to a good start into 2021, with comparable store sales up 23% in February, driven by the continued strength of global hardware sales. Looking ahead, we’re excited about the opportunity.” When we start prioritizing digital and e-commerce initiatives as our core business continues in this emerging console cycle, “said George Sherman, CEO of GameStop, in the earnings release.

Tuesday’s earnings mark GameStop’s first quarterly report since the GameStop retail craze in January.

In January, an epic short squeeze in GameStop’s stock shocked Wall Street, drawing attention to a rising class of retail investors on social media platforms like Reddit. GameStop’s share price rose to $ 483 per share and then lost 90% of its value. The controversy drew the attention of Wall Street and Washington.

Since GameStop’s rise and fall in January, the stock has continued to rise, with stocks rising nearly 70% this month. GameStop’s stock is up more than 860% in 2021.

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

GameStop stock has had a positive impact on new developments for the company over the past five months, such as the appointment of Chewy co-founder Ryan Cohen to the GameStop board of directors and the transition from technology and e-commerce to GameStop.

GameStop said it continues to seek executives with e-commerce, retail and technology expertise to support its turnaround.

Earlier this month, GameStop announced that Cohen had been won over to move to e-commerce. Cohen chairs a special committee formed by the GameStop board of directors to support its transformation. Board members Alan Attal, Chewy’s former top operations manager, and Kurt Wolf, Hestia Capital Management’s chief investment officer, are also on the committee.

The committee has already appointed a chief technology officer, hired two executives to lead customer service and e-commerce fulfillment, and started a 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 26th. Citing sources familiar with the matter, Business Insider reported that Bell was marketed by Cohen.

GameStop said Tuesday its chief customer officer Frank Hamlin would step down.

The company announced it will continue to suspend the guidelines, but is updating its fulfillment operations to increase the speed of its delivery and services.

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