(Bloomberg) — Shares of GameStop Corp. fell on Friday after Keith Gill’s much-anticipated return to YouTube, as well as the video-game retailer unexpectedly releasing earnings and announcing plans to sell up to 75 million additional shares at the start of the year. day.
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The stock plunged 39% after Gill’s appearance on the “Roaring Kitty” stream, where he reiterated his views on the stock and confirmed his large position posted on his Reddit account. Investors, who have sent shares on a wild ride in recent weeks, praised Ryan Cohen, chief executive of GameStop and the largest shareholder, and expressed faith in the ability of the management team to rework the business.
The stream at one point had over 600,000 viewers. Popular X accounts like Dave Portnoy and WallStreetBets also featured live streams around Gill’s return that each attracted more than 100,000 viewers. Shares of GameStop were halted for a ninth of their volatility between noon and 1:10 a.m. in New York, as Gill’s livestream went ahead.
The show alternates between weird and serious. It starts with a video of a feisty kitten and ends with Gill sitting on a gaming chair wearing sunglasses, a sticker on her face and a seemingly unnecessary arm sling. He drank beer and riffed on viewers’ comments at times when he wasn’t discussing GameStop’s potential.
“It’s a strange spectacle,” said Steve Sosnick, chief strategist at Interactive Brokers. “At least she seemed to reply that the position was hers and that she was still Roaring Kitty.”
The stream is about 50 minutes long and ends with a montage of sleeping kittens. All told, more than 40 million shares were traded between the stream’s scheduled start and conclusion. With more than 274 million shares traded on Friday, the stock had its most active day since March 2021.
GameStop options had the busiest session since 2021, with one of the most popular options being a call that required the stock price to triple by the end of the session to be worth it. This follows an active Thursday that saw the most contracts in a single session since 2022.
GameStop’s first-quarter results, originally planned for Tuesday, showed slower sales and a wider loss than analysts had expected. The new stock, which can be sold into the market at the prevailing price, is in addition to GameStop selling nearly $1 billion worth of stock last month.
Gill, who first came to meme influencer fame in 2021, returned to X with a cryptic post on May 12. That caused a 167% rise in GameStop shares through Thursday’s close, adding $11 billion to the market value over the period.
GameStop’s poor first-quarter results were teased last month when the company decided to sell 45 million shares. The program is also an on-market offering, where investment banks create shares and sell them at market prices, with the proceeds added to GameStop’s balance sheet.
In a filing detailing plans to offer more stock, GameStop did not indicate that sales had begun. Based on Friday’s closing price, the sale of the full amount could net approximately $2.1 billion to join the company in May and $1.08 billion in cash and equivalents at the end of the last quarter. Jefferies LLC is acting as the selling agent in the offering, the filing said.
Before Friday’s sharp decline, some market observers described GameStop’s attempt to raise cash amid another meme-stock frenzy as smart, while others saw it as exploitative of existing shareholders. If the banker sells the full offering, it will increase the number of shares outstanding by more than 20%, further diluting investors. The sell-off also typically puts pressure on the stock’s near-term performance.
Gill’s mysterious X post, combined with a portfolio check on the DeepF—-ingValue handle on Reddit, sent investors piling into GameStop stock over the past four weeks. The stock surged in that regard despite a selloff in the stock and provided preliminary sales numbers that indicated declining results. It has bolstered Gill’s apparent position in the company for more than $500 million through Friday’s closing, when accounting for common stock and call options, according to a Reddit post dated June 6.
GameStop’s stock price “is divorced from its business,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. He didn’t plan to watch what he called a “spectacle” of Gill’s return.
Bullish speculation
His livestream is accompanied by a disclaimer warning that the video will be based on his opinion, along with a legal notice that past performance does not indicate future results – something that has not been seen in previous posts from the account.
“This YouTube channel has no obligation to update or correct the information provided in the video,” the disclaimer said. “Statements and opinions are subject to change without notice. No compensation is received by this YouTube channel for the opinions expressed.
The posts and the market’s reaction to them have fueled conversations about whether Gill’s social media actions could amount to market manipulation. Online brokerage E*Trade is considering banning Gill from its platform, in part because of his influence on its stock, the Wall Street Journal reported earlier this week.
“What the government must show to pursue a market manipulation theory is manipulative intent,” said Pillsbury partner David Oliwenstein, a member of the firm’s Corporate Investigations & White Collar Defense team and former senior counsel in the SEC’s Market Abuse Unit.
In the livestream, Gill showed an E*Trade screen that corresponded to five million shares of stock and 120,000 call shares at $20 expiring June 21. Using current prices the position would be worth nearly $260 million, data compiled by Bloomberg show.
“It is safe to assume that the SEC will at least take a hard look at trading,” Oliwenstein said.
–With assistance from Carmen Reinicke, Subrat Patnaik and Carly Wanna.
(Update with motion shows.)
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