GameStop Just Made $500 Million Thanks To The Reddit Drama
GameStop sold 3.5 million shares to generate half-a-billion dollars to help fuel the company's growth and transformation.
Video game retailer GameStop has completed its plan to sell 3.5 million shares to generate funds to help accelerate its transformation to become a successful company. GameStop has now sold those shares and the market value of them brought in about $551 million.
As announced previously, this money will be used to help with GameStop's transformation efforts and for "general corporate purposes and further strengthening the company's balance sheet."
GameStop's share price currently stands at around $180. It's down from the madness of earlier in 2021 thanks to the Reddit short squeeze, but it's still a massive increase over where the stock price was six months ago. The stock price is also higher that it has been for most of April 2021 which may be unusual when a company sells its own stock.
A report from February said GameStop explored the possibility of a share buyback earlier this year, but, because GameStop was in the middle of a fiscal quarter and hadn't yet been able to report financial results for the period, it couldn't or wouldn't do so due to SEC regulations. GameStop filed its latest earnings release in March, which apparently cleared the way for this kind of equity program to come to fruition.
GameStop has big plans to turn things around, and this buyback could help give the company the cash it needs to execute on its strategy. The retailer recently hired a "Growth Officer" whose job it will be to oversee GameStop's transition. GameStop also just hired new brand development and merchandising executives to help with this move.
GameStop's new chairman is Ryan Cohen, the billionaire investor and Chewy founder who has called for serious and dramatic changes to GameStop's business plan to improve results. One part of this will be finding a new CEO to replace George Sherman, who is stepping down this summer by July 31 or when a replacement is found.
Sherman is leaving GameStop with more than 1 million shares, which could be worth over $150 million, depending on how the company's stock price fares. The Wall Street Journal reported that a series of other outgoing executives are receiving very lucrative exit packages.
As for what Cohen's plan actually is to help make GameStop a profitable company again, Bloomberg cited sources saying he plans to push "rapidly" into e-commerce, taking some of his learnings from his pet food company Chewy and applying them to GameStop. He also plans to make GameStop's customer service better and "aggressively" expand the products that GameStop offers. One major potential issue is that GameStop has a lot of physical stores, and the report said the plan is to close stores and transform the ones that do stay open into things like "training centers for aspiring esports gamers."
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