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GameStop (GME) Raises $1.1 Billion Through ATM Equity Offering

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GameStop Corp. (GME - Free Report) was up as much as 10% during the trading session on Jun 22, following the company’s announcement of completing its at-the-market equity offering program (“ATM Offering”). Through the program, the company sold 5 million shares and raised as much as $1.13 billion. Clearly, this much-acclaimed meme stock has been successful in cashing-in on its phenomenal price surge on the bourses witnessed earlier this year. The proceeds generated from such offerings will be utilized by the company for growth initiatives and strengthening financial base. Notably, shares of this Zacks Rank #3 (Hold) stock have skyrocketed 993.8% in the past six months compared with the industry’s rise of 36.7%.

Efforts to Strengthen Financial Position Bodes well

The ATM offering is a prudent move by this gaming retailer for leveraging the massive price surge witnessed since January, owing to potential short-squeeze events. On Jun 9, GameStop had filed a prospectus supplement with the U.S. Securities and Exchange Commission, stating that it may offer and sell up to a maximum of 5 million shares. The company ultimately completed selling the proposed shares. It generated aggregate gross proceeds before commissions and offering expenses of approximately $1,126,000,000. Management highlighted that the proceeds will be used for supporting growth initiatives as well as for general corporate purposes and strengthening balance sheet. Prior to this, the company completed the sale of 3.5 million shares of its common stock through ATM Offerings, whereby it generated collective gross proceeds of nearly $551 million.

GameStop has also undertaken well-chalked efforts to reduce debt levels. It completed the redemption of $202 million of senior notes due in 2021, the voluntary early redemption of $216.4 million of 10% senior notes due in 2023 (which represented the company’s entire long-term debt) as well as the paydown of the company’s asset-based revolving credit facility worth $135 million. As a result, at the end of first-quarter fiscal 2021, the company had no borrowings under its asset-based revolving credit facility and no long-term debt. The elimination of such debt is likely to help the company strengthen its balance sheet as well as support transformation.

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Board Restructuring & Other Growth Efforts

We note that the company has been undertaking prudent efforts to accelerate business transformation, especially in the digital arena. To fast track growth, GameStop has been restructuring its board and formed a Strategic Planning and Capital Allocation Committee. Since the formation of this committee, the company appointed several board executives with significant experience in e-commerce, customer care and technology.

Speaking of e-commerce, GameStop has been focusing on bolstering omni-channel capabilities. It has been gaining from enhanced fulfillment capabilities including the roll-out of same-day delivery option and several flexible payment options. To further boost consumers’ shopping experience, the company enhanced search and navigation as well as post-purchase features. It also launched a new mobile app with improved features. Moreover, the company’s multi-year strategic deal with Microsoft, for providing customers with enhanced digital solutions is encouraging.

In addition to these, the company is focusing on boosting assortments, especially in high margin product categories, private label and collectibles. It has also been expanding its fulfillment network and is progressing well with strategic store de-densification strategy.

Clearly, GameStop is undertaking every effort to evolve as a strong and digitally advanced player in the gaming industry. Moreover, the influx of cash through the latest equity offering will enable the company to undertake radical transformation initiatives.

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