The share price of video game retailer GameStop(NYSE:GME) fell sharply in premarket trading Monday after the company said it plans to sell up to 3.5 million additional shares.
GameStop is trying to take advantage of its stock price surge following the Reddit-driven trading frenzy that continues to prop up its shares. The company also said global sales for the nine-week period ending April 4 rose 11% compared to a year earlier.
GameStop shares were down nearly 13% at $168.20 in pre-market trading.
The company said the new shares will be sold through an "at-the-market" offering, which lets a publicly traded company raise capital over time.
Analysts have been urging GameStop to put more shares on the market as the price of its stock surged from $20 each to nearly $500. A stock sale will allow the company to pay down debts that it accumulated as a technology shift led gamers to spend money online rather than in GameStop’s retail stores.
GameStop shares skyrocketed 1,625% in January as bands of retail investors communicating on social media hyped up the retailer’s stock, putting pressure on hedge funds to sell in a "short squeeze" that only sent the stock price higher.
Shares typically fall when a share sale is announced because it waters down the value of shares already in investors' hands. That happened Monday, with shares sliding nearly 15%. But a share still costs more than $161, meaning prices remain up more than 900% year-to-date.
The company, based in Grapevine, Texas, also said Monday that preliminary fiscal first-quarter to-date global sales are up about 11% from a year ago, a period when retailers such as GameStop were forced to close stores due to the pandemic.
