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GameStop shares fell more than 20% in premarket Friday after the video game retailer announced plans to sell securities and reported preliminary results showing a decline in first-quarter sales.
The company said in a new regulatory filing that it will sell up to 45 million shares of its Class A common stock in an open market offering. The offering comes after GameStop's stock price soared earlier this week on a brief resurgence in meme stock trading.
Meanwhile, GameStop said in a separate statement that it expects net sales to be in the range of $872 million to $892 million, down from $1.237 billion in the year-ago period. Two analysts surveyed by FactSet expected first-quarter sales of about $1 billion.
Net loss is expected to be in the range of $27 million to $37 million, compared with a net loss of $50.5 million in the year-ago period. Brick-and-mortar video game companies are grappling with intense competition from e-commerce-based competitors. In late March, GameStop announced an unspecified number of layoffs to cut costs.
GameStop's rally this week appears to have been fueled in part by a post on X from the long-dormant account of Keith Gill, aka Rolling Kitty, one of the key figures in the 2021 meme stock mania. GameStop hit a high of $64.83 per share on Tuesday, up more than 200% from last Friday's closing price level.
The move appeared to stall in the second half of the week, with shares plummeting on Wednesday and Thursday. The stock closed Thursday at just $27.67, down more than 50% from this week's high. This year's net inflows to individual traders are significantly lower than during the trading frenzy three years ago.
Michael Pachter, a Wedbush analyst who covers GameStop, said the company is not in a position to make a profit.
“They made $6 million last year and burned cash,” Pachter said. “We expect to lose $100 million a year going forward. It's a race to close stores fast enough to limit losses, but there are no plans that look like we can grow revenue or profits, and our core business is in decline.” .
Pachter has an underperform rating on GameStop and a $5.60 price target.
—CNBC's Jesse Pound contributed reporting.
