GameStop Corp.'s stock price fell sharply, and previously released documents revealed that the company may sell more shares. The stock, which surged 271% after being fueled by the “meme stock” boom at the beginning of this week, further erased gains.
The company's shares plummeted 20% on Friday. The video game retailer reached an agreement that could issue up to 45 million shares and announced a drop in initial net sales for the first quarter. Over the three-day decline, the stock's market value evaporated by more than 8 billion US dollars, and the weekly increase narrowed to 27%.
In his report to clients, Wedbush analyst Michael Pachter wrote, “GameStop is taking advantage of the recent sharp rise in stock prices to issue shares at a prudent premium to provide itself with more reserves while trying to refocus its business priorities and reverse ongoing operating losses.”
GameStop said on Friday that initial net sales for the first quarter were between $872 million and $892 million, compared to $1.2 billion in the same period last year.
AMC Entertainment declined 5.2%. The stock also joined the recent turbulent trend. Earlier this week, AMC took advantage of rising stock prices to swap shares to reduce debt, and said it had completed its previously announced stock offering.
The intensity of trading that has fueled this week's gains has declined markedly. “Retail investors' purchases of GameStop and AMC have been drastically reduced,” said Giacomo Pierantoni, head of data at Vanda Research.
He said that GameStop's capital inflow in the past two days was around $5 million, while AMC's capital inflow was “almost zero” on Thursday.