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Companies should raise funds at good rates when they can get them. That is common sense. But adding $450mn-plus to a $4bn hoard without detailing plans for the cash? That is plain cheeky.
Investors might finally have had enough. Shares in GameStop fell 12 per cent on the share sale this week, having risen the last two times the retailer tapped shareholders for funds that it had no clear plans for.
It is now a year since investor Ryan Cohen added chief executive to his role as GameStop’s chair. Initially, his appointment stoked retail investor hopes that the founder of Chewy, the online pet supplies store, and one-time backer of fellow meme stock Bed Bath & Beyond would work his magic on their beloved games retailer. But, so far, there is little evidence of change beyond some trimming of expenses. GameStop’s stated objectives — profitability, leveraging its brand and “omnichannel excellence” — haven’t been altered or updated either.
Management have said very little at all, in fact, beyond mandatory filings and they haven’t held quarterly earnings calls. That isn’t for lack of interest: online demand to attend its annual general meeting in June was so great the hosting site crashed and the meeting had to be rescheduled.
Enthusiasm from its army of retail investors is the sole reason GameStop has been able to raise so much money. Two share sales in May and June already netted it $3bn. Those coincided with surging investor interest around the online return of Roaring Kitty — real name Keith Gill — the company’s leading investor cheerleader during the mad meme stock days of 2021. Assuming GameStop sells the planned 20mn new shares, its cash pile will reach roughly $4.6bn, or about half its market capitalisation.
That is beginning to look more like an investment holding company with a small sideline dealing in games and collectibles — a view supported by its creation in the last year of an investing committee consisting of Cohen and two other directors. The committee, GameStop’s filings say, manages its investments in public and private markets; its members can also put their own money in alongside GameStop’s dollars.
References to “GameShire StopAway” have begun to pop up among the rocket emojis and HODL (hold on for dear life) exhortations in Reddit’s investing forums. The less-than-complimentary comparisons to Warren Buffett’s holding company Berkshire Hathaway suggest the mood has changed. Investors may be getting impatient with GameStop. It’s about time.