It looks like the effects of the return of Roaring Kitty are still lingering, as GameStop (NYSE:GME) stock is up by 20% following the completion of its $933.4 million at-the-market (ATM) offering, equivalent to 45 million shares. The offering was announced on May 17.
Roaring Kitty made his return on X (formerly Twitter) following a nearly three-year social media hiatus, sending meme stocks across the board higher. Roaring Kitty, real name Keith Gill, was a leading figure in the 2021 meme stock rally.
This is an unusual move, as ATM offerings usually don’t result in significant gains. Rather, offerings usually have the opposite effect due to their dilutive nature. In other words, the offering resulted in more shares outstanding, meaning that the value of each share decreased, all else held equal.
GME Stock Surges Following Completion of ATM Offering
GameStop noted that the offering proceeds will go toward working capital and general corporate purposes. The company may also choose to invest the proceeds into interest-bearing securities
GME stock’s surge could be attributed to a short squeeze. GameStop currently has a short interest as a percentage of float of 20.5%, according to Ortex Technologies. A short interest of 10% is generally viewed as high, while a short interest of 20% or above is viewed as very high.
Last week, Independent presidential candidate Robert F. Kennedy Jr. announced a $24,000 stake in GME stock in a stand against “predatory short selling.” The relatively small stake is likely an attempt to attract voters ahead of the November election.
Meanwhile, the video game retailer reported its preliminary first-quarter earnings earlier this month. GameStop believes that first quarter sales will be between $872 million and $892 million, down from $1.237 billion year-over-year (YOY). Profitability remains an issue for the company, as net loss is forecast to be between $27 million and $37 million, improving from $50.5 million.
On the bright side, the company’s cost-cutting initiative seems to be working. Selling, general and administrative (SG&A) expenses are expected to be between $290 million and $300 million, down from $345.7 million a year ago.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
