GameStop (NYSE:) shares fell more than 9% in premarket trading in the United States after the video game retailer said it would issue more shares despite reporting a decline in second-quarter revenue.
The company, which became known as a focal point of the “meme stock” craze at the start of the decade, said it would use the proceeds from the issuance of up to 20 million new shares to fund “general corporate purposes,” including “potential acquisitions and investments in a manner consistent with our investment policy.”
Analysts at Vital Knowledge noted that GameStop ended the quarter with about $4.2 billion in cash, or about $12 a share. Shares of the company closed at $23.45 on Tuesday.
“Investors are watching closely to see how all this money will be deployed (as the current operating business is clearly in terminal decline),” analysts said in a note to clients.
For the quarter ended Aug. 3, GameStop reported revenue of $798.3 million, down from $1.16 billion in the year-ago period, a sign that the company continues to face pressure from surging online game purchases and sluggish performance at its brick-and-mortar stores.
Referring to comments made by CEO Ryan Cohen earlier this year, GameStop said it is focused on “containing costs,” including closing underperforming stores. It added that it is currently reviewing its store portfolio and noted that “a larger number” of stores may be closed than “we have closed in the last few years.”
Net income for the quarter was $14.8 million, a turnaround from a loss of $2.8 million a year earlier, thanks in part to a reduction in GameStop’s selling and administrative expenses.
GameStop shares have been wildly volatile this year, in part because stock influencer Roaring Kitty returned to X.com in May after a three-year hiatus from social media. Roaring Kitty, the online name of financial marketer Keith Gill, was a major player in boosting interest in so-called “meme stocks” like GameStop in 2021.
Yassin Ibrahim and Reuters contributed to this report.