(Reuters) – GameStop Corp’s stock fell 12% Monday after the video game retailer said it could sell up to $ 1 billion in stock as it benefits from a staggering rise in its stock this year thanks to a Reddit-fueled retail trading frenzy.
The company said it would sell up to 3.5 million shares and use the proceeds to accelerate the shift from its business model to e-commerce in an overhaul led by top shareholder and board member Ryan Cohen.
At Thursday’s closing price of $ 191.45, “in the market” sale could bring GameStop up to $ 670 million. However, the company is under no obligation to sell stock at that value as market-based programs allow companies to sell stock over an extended period of time.
Shares of GameStop are up more than 900% so far this year, earning the company a whopping $ 34 billion valuation at one point when retailers bet against Wall Street hedge funds that had shorted their stocks.
Movie theater operator AMC and airline American Airlines, which also took advantage of the Reddit-fueled January trading frenzy, were able to sell stock, but GameStop was unable to do so due to legal restrictions.
GameStop warned investors that purchasing shares in its offering could result in a “significant” loss if the price of its stock falls.
The new market prospectus filed with the US Securities and Exchange Commission replaces a December prospectus in which GameStop had registered to sell $ 100 million worth of stock. The company said it had not sold any shares under the December prospectus.
GameStop said Jefferies LLC is acting as the sales agent for the new offering at a commission of up to 1.5% of the gross sales price per share.
Separately, GameStop said global sales were up about 11% for the nine-week period ending April 4.
Its shares fell $ 168.76 in premarket trading.
Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty