Shares for video game retailer GameStop spiked nearly 9% as markets opened on Tuesday morning.
The firm announced that it successfully sold 5,000,000 shares of stock to generate $1.13 billion, which executives will use for “general corporate purposes as well as for investing in growth initiatives and maintaining a strong balance sheet.”
The company’s stock is now trading at over $220 per share. In August of 2020, shares sold for less than $5 each.
This is the second stock sale that GameStop has conducted since the company became a star on Reddit’s WallStreetBets forum… GameStop sold 3.5 million additional shares in April and raised $551 million.
Investors have been encouraged by the moves and looked past the dilution of their stakes as GameStop took advantage of its monstrous rally this year to speed up its e-commerce transformation. The stock has advanced over 1,000% in 2021.
Yesterday, the Financial Times reported that White Square Capital — a London-based hedge fund that bet against GameStop — shuttered its main fund after suffering double-digit losses since January.
The retailer recently hired former Amazon executives Matt Furlong and Mike Recupero to serve as CEO and CFO, respectively. The company announced in a press release that it would seek to “actively pursue senior talent with gaming, retail, and technology experience.”
GameStop made a stir on Wall Street in January after users on a Reddit group called WallStreetBets decided to collectively purchase shares. The intention was to create a “short squeeze” — a scenario in which institutional investors betting against the stock would be forced to take heavy losses as prices soared.
Several business moguls were thrilled that small investors were humbling Wall Street.
“Old days where a hedge fund manager could quietly short a stock, then publish negative research and take a bullhorn to it in the media are over,” tweeted Canadian entrepreneur Kevin O’Leary. “They now run the risk that the power of the crowd will turn on them and squeeze their heads like a teenage pimple. I’m good with it!”
“Here come the shorty apologists,” “give them no respect,” “Get Shorty,” Tesla and SpaceX CEO Elon Musk said about those defending the hedge funds that shorted GameStop.
“We are going to crash those stocks so all our hedge fund billionaire friends can get out and not get killed is one of the most remarkable, illegal, shocking robberies in history,” said Barstool Sports founder Dave Portnoy after popular trading platform Robinhood disallowed purchases of GameStop shares.
Some lawmakers asked federal agencies to more closely regulate “market manipulation” that arose from meme stocks.
In a letter to the Securities and Exchange Commission (SEC), Sen. Elizabeth Warren (D-MA) said that she was “deeply concerned that these casino-like swings in the value of GameStop and other company shares,” which represented “yet another example of the gamesmanship that interferes with the ‘fair, orderly, and efficient’ function of the market, raising obvious questions about public confidence in the market and those trading in it.”
“I am writing to seek information on how the SEC intends to address these concerns and prevent these and future incidents of potential market manipulation,” said Warren. “Hedge funds, such as Melvin Capital Management, have bet that GameStop’s shares would fall in the hopes of reaping substantial profits.”