GameStop stock drops on share sale plan and Roaring Kitty livestream

GameStop shares plunged on Friday after the struggling video game retailer announced plans for a new share sale, despite efforts by the “meme stock” trader Roaring Kitty to drum up support for the stock.

Shares in GameStop closed almost 40 per cent lower, trimming the feverish gains since the mid-May return of Roaring Kitty — real name Keith Gill, who became famous in 2021 for talking up the lossmaking company.

In a YouTube livestream on Friday afternoon, Gill said he had “a lot of the same feelings” as in 2021, and emphasised his support for chief executive Ryan Cohen.

“Ryan Cohen and his crew, that’s what folks should be focused on . . . I feel like I’ve seen enough where I believe this guy might be able to do it.”

GameStop has taken advantage of its popularity with retail traders to bolster its financial position with repeated stock sales, and on Friday morning it disclosed plans to sell another 75mn shares.

That announcement came alongside an earlier-than-scheduled publication of its first-quarter financial results, which showed a 29 per cent year-on-year drop in sales but a narrowing of net losses from $50.5mn to $32.3mn. The figures were in the middle of a forecast range the company provided last month.

GameStop’s core business selling game consoles, software and collectibles has been in decline, while its retail footprint has shrunk by more than a quarter in the past five years to just over 4,000 stores, mostly in the US. Gains on investments have helped staunch losses from the challenged retail operations in recent quarters, however.

Last month GameStop sold 45mn new shares, pulling in $933mn, after Gill’s re-emergence with a series of cryptic social media posts sent the stock sharply higher. It reported cash of $999mn in the first quarter before the new funds and it has minimal debt. Were it to sell the new shares at Friday’s afternoon’s price of $27.90, it would raise a further $2.1bn.

Screenshots posted earlier this week showed Gill had taken out a position in GameStop stock and call options worth as much as $557mn, prompting speculation that he was being supported by a third-party funder. He said on Friday’s livestream that there were “no other folks I’m working with” and GameStop was his only investment. 

Even after Friday’s decline, GameStop’s shares are still up about 60 per cent since Gill’s return in mid-May.

An image of Roaring Kitty’s E*Trade account shown during the livestream showed his position had lost more than $200mn in value on Friday but was still up almost $150mn since his initial investments.

Gill, who was sporting white sunglasses, a head bandage and multiple Band-Aids, burst out laughing after his announcement that the livestream would end coincided with a fresh daily low in the stock. 

“That’s your bad for thinking I’m all there,” he said. “I’m not.”

Additional reporting by Gregory Meyer