GameStop shares slumped again in early Friday trading after the videogame retailer reported preliminary fiscal-first-quarter results and said it would attempt to raise fresh equity capital.
GameStop (GME) , which has soared more than 168% over the past month, adding around $5.3 billion to its overall market value, posted preliminary results for the 13 weeks ended May 4 in an unscheduled release filed with the Securities and Exchange Commission.
Net sales for the quarter are likely to come in between $872 million and $892 million, a 27% decline from the same period last year at the higher end of the forecast, with a net loss of around $37 million.
GameStop added that it carried between $1.07 billion and $1.09 billion in cash equivalents and marketable securities at the end of the quarter, down from around $1.31 billion a year earlier.
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The Grapevine, Texas, group also said it would look to raise an undisclosed amount of fresh equity capital and filed a so-called mixed shelf offering with the SEC.
The filing gives the group flexibility on the time, size and types of securities it can sell when it deems markets conditions will enable it to raise the most amount of cash at the lowest overall cost.
GameStop warns on volatility
AMC Entertainment (AMC) , another so-called meme stock that has benefited from enormous share-price gains this week despite weakening business conditions and company fundamentals, completed a $163 million debt-for-equity swap earlier this week.
GameStop did note, however, a host of risk factors tied to the offering, including "volatility in our common stock price, including volatility due to potential short squeezes."
Related: GameStop rockets, pounding short sellers, as 'Roaring Kitty' returns
In its filing the group also noted "the availability of content via public media that is published by third parties, including blogs, posts, articles, message boards and social and other media that may include statements not attributable to the Company and may not be reliable or accurate."
Short interest in GameStop shares remains elevated, according to data from both S3 Partners and financial-analytics group Ortex. The former suggested earlier this week that around 63.2 million shares, or 23.7% of the company's float outstanding, have been shorted.
Short-sellers bet against a company by borrowing shares and selling them. If the price of the stock declines, the short-sellers will buy back the shares at a lower price, return the borrowed stock (while paying a fee), and pocket the difference.
Short interest elevated
The cost of borrowing GameStop shares, however, remains prohibitively high, with recent data from Ortex indicating a daily rate of around 35%.
GameStop shares were marked 25.4% lower in early Friday trading to change hands at $20.77 each. That's down some 67% from the stock's midweek high of $64.83 but still more than 105% higher than it was a month ago.
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The stock's fortunes were revived last Sunday when Keith Gill, better known by his online alias, Roaring Kitty, posted the first message on his verified X social media account in three years, depicting an image of man leaning forward in a chair.
The image, which appeared to indicate someone sitting up and paying attention, included no other information and didn't include any reference to a particular stock. It was nonetheless tied to GameStop, which Gill began touting in January 2021.
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