GameStop (GME) stock rallied as much as 22% on Tuesday after the video game retailer announced it and raised over $1 billion in its most recent equity offering. GameStop shares began at approximately $23, considerably below the over $65 level touched earlier this month after a brief meme surge.
Still, one strategist believes that Tuesday’s stock activity represents investor excitement in meme stocks or those that have been bid up by online talk to the point where they have become disconnected from fundamentals.
“If this were a normal market, people would be a little freaked out,” Interactive Brokers’ chief strategist, Steve Sosnick, told Yahoo Finance.
He continued, “You do not sell shares into the market if you believe it is undervalued. You do it because you believe your stock is overvalued.”
GameStop is a heavily shorted stock, with short interest totalling slightly over 21% of the float.
GameStop Stock overview
According to a Friday statement, the business capitalized on the surprise meme rally in mid-May, selling 45 million shares for around $933 million.
GameStop said it plans to use the net profits for general corporate reasons, including as acquisitions and investments.
When the offering and the company’s preliminary financial results were originally published on May 17, shares of the company fell as much as 30% on that day.
Given the video game retailer’s precarious financial situation, some Wall Street analysts thought the offering was a wise decision.
According to GameStop’s most recent earnings report, the company’s quarterly sales decreased significantly from the same period last year.
AMC Entertainment (AMC), a companion meme stock play, also made an effort to sell stock at the same time as GameStop.
The movie theatre business raised $250 million earlier this month by selling 72.5 million shares, taking advantage of the meme frenzy.
AMC shares rose more than 2% on Tuesday.
GameStop soared over a two-day span which started May 13 after the online reemergence of “Roaring Kitty,” the person who is seen as the kick-starter of the meme stock frenzy in 2021.
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Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
