Investors Hit Pause as GameStop Goes Quiet on Reorg

Video game retailer GameStop Corp tumbled 8 percent in early trading on Thursday as the company’s silence on its turnaround plan left its army of small-time investors questioning the meteoric rise in its share price this year.

Although the company posted a 25 percent jump in quarterly sales late on Wednesday, executives failed to lay out fresh details about how it will refashion itself into a gaming and entertainment retailer.

Shares fell 7.6 percent to $183.70 in premarket, still far below the $482.95 that some investors paid in January, but well above the $18 they traded at in December.

Thursday’s drop was also subdued compared with the 30 percent move in its shares after each of its previous two earnings reports.

“When this meme trade ends (if ever) this will likely be a steep, ugly fall,” Jake Dollarhide, chief executive officer at Longbow Asset Management, said in a LinkedIn post.

“Revenues are now half of what they were in 2018 when this was a profitable $14 stock before gaming went totally to the cloud.”

The company earlier this year was at the center of a battle between small-time traders and Wall Street hedge funds who had bet that shares would fall. It has since raised more than $1 billion in new equity, partly to fuel its reorganization plans.

Investors had been looking for more details on efforts by chairman and top shareholder Ryan Cohen to focus on e-commerce, while also trying to rejuvenate the physical stores after a year of pandemic-related closures.

Net sales in the second quarter jumped to $1.18 billion, but the company also posted a bigger-than-expected adjusted loss of 76 cents per share.

Reuters

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