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GameStop (GME) Raises $551M, Speeds Transformation Process

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GameStop Corp.’s (GME - Free Report) shares continued to exhibit strength and jumped roughly 12% on Apr 26 during the trading session. The company stated that it has completed the sale of 3.5 million shares of its common stock through the “at-the-market” equity offering program (the “ATM Offering”). It generated collective gross proceeds before commissions and offering expenses of roughly $551 million.

Management will utilize the net proceeds toward accelerating GameStop’s transformation and for general corporate functions along with strengthening the balance sheet. Industry experts opine that the company’s action of selling shares helped it to cash in on the massive price surge witnessed since January due to potential short-squeeze events.

On Apr 5, the company had filed a prospectus supplement with the U.S. Securities and Exchange Commission, wherein it can offer and sell up to a ceiling of 3,500,000 shares of common stock from time to time via the ATM Offering. We note that GameStop had also issued an irrevocable notice to redeem $216.4 million in principal amount of its 10% Senior Notes due 2023. This covers the full amount of the outstanding Notes, thus representing its entire long-term debt.

In order to accelerate transformation, the Zacks Rank #3 (Hold) company has been undertaking board restructuring. It has formed a Strategic Planning and Capital Allocation Committee. Since the formation of this committee, GameStop has appointed several board executives with significant experience in e-commerce, customer care and technology. Moreover, the influx of cash through the latest equity offering will further strengthen the company to undertake radical transformation initiatives. Such moves are expected to help the company evolve into a strong and digitally advanced player in the gaming industry.

What’s More?

GameStop has been gaining from continued rise in e-commerce. Notably, the company’s e-commerce sales surged 175% during the fourth quarter of fiscal 2020. Markedly, e-commerce sales increased 257%, 800% and 519% during the third, the second and the first quarter of fiscal 2020, respectively. During the fourth quarter, total e-commerce sales contributed 34% to total net sales. Results gained from increase in demand for consoles as the company transitioned from generation eight to generation nine console gaming products.

Management highlighted that the company’s online wing is gaining from investments made to boost omni-channel capabilities. In this respect, the company has been gaining from enhanced fulfilment capabilities, including the initial rollout of same-day delivery option and several flexible payment options.


 

Impressively, the Grapevine, TX-based company’s shares have skyrocketed 796.7% year to date versus the industry’s 41.8% surge.

Better-Ranked Stocks in Retail

Conn's (CONN - Free Report) has delivered an average earnings surprise of 190.2% in the past four quarters. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Big Lots (BIG - Free Report) has an expected long-term earnings growth rate of 11.2% and currently has a Zacks Rank #2 (Buy).

Macy’s (M - Free Report) , also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 12%.

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