Last week, I discussed a similar announcement made by AMC Entertainment
Thankfully for GameStop investors, the gaming retailer is in much better shape financially, with bankruptcy being well out of the question. The possibility exists for GameStop to immensely benefit from the issuing of new shares, especially since the company plans to offer far less shares than AMC, which lessens the risk of severe dilution. Of course, the risk of dilution is still very much real, and it is just as likely that the firm drives its own share price down.
GameStop's intent to transform its business model to include more ecommerce and the promising early sales figures from the first months of 2021 could easily push the company to success in its offering, but the company's transition has come extremely late, and its market share continues to be eroded by existing online game stores such as Steam, Origin, GOG, and Origin, owned by Valve, Electronic Arts
While some investors are still bullish on GameStop's offering, putting their faith into the company's transition, others are still concerned that the company's current share price and the enthusiasm surrounding it are too optimistic. Many analysts believe that the company may be hedging its bets too much on a similar rush by retail investors as earlier this year, though many analysts don't seem to think a second "Reddit blitz" is coming.
GameStop's share price plummeted briefly on Monday before immediately recovering, losing 10% in pre-market trading before recovering 11% by around midday. In the days after, however, GameStop seems to have entered a downward trend, likely as Wall Street contends with the pros and cons of GameStop's intended stock offering. GameStop slid 6.2% between its midday high on Monday and midday on Wednesday.