Yahoo Finance GameStop Slumps on Share Sale Plan as Gill Makes YouTube Return
(Bloomberg) -- GameStop Corp. stock tumbled further on Friday after the highly-anticipated return of Keith Gill to YouTube, as well as the video-game retailer unexpectedly releasing earnings and announcing plans to sell up to 75 million additional shares earlier in the day.
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The stock sank 39% following Gill’s appearance on the “Roaring Kitty” stream, where he reiterated his views on the stock and confirmed that the massive positions posted on his Reddit account are his. The investor, who has sent shares on a wild ride in recent weeks, praised Ryan Cohen, GameStop’s chief executive and largest shareholder, and expressed faith in the management team’s ability to rework its business.
The stream at one point courted more than 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. GameStop shares were halted for volatility nine times between noon and 1:10 p.m. in New York, as Gill’s livestream progressed.
The event alternated between the bizarre and the serious. It started with a video of feisty kittens and eventually showed Gill sitting in a gaming chair wearing sunglasses, stickers on his face and an arm sling he apparently did not need. He drank beer and riffed on viewers’ comments at times when he was not discussing GameStop’s potential.
“It’s a bizarre spectacle,” said Steve Sosnick, chief strategist at Interactive Brokers. “At least he’s seemed to answer that the positions are really his and that he is indeed still Roaring Kitty.”
The stream lasted roughly 50 minutes and concluded with a montage of sleeping kittens. All told, more than 40 million shares were traded between the stream’s scheduled start and its conclusion. With more than 274 million shares traded Friday, the stock had its most active day since March 2021.
GameStop options had their 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 something. That followed an active Thursday that saw the most contracts move in a single session since 2022.
GameStop’s first-quarter results, which were initially planned for Tuesday, showed slowing sales and a wider loss than analysts had expected. The new shares, which can be sold into the market at prevailing prices, comes in addition to GameStop selling nearly $1 billion worth of stock last month.
Gill, who first came to meme stock influencer fame in 2021, returned to X with a cryptic post on May 12. That fueled a 167% rise in GameStop shares through Thursday’s close, adding $11 billion to its market value over that stretch.
GameStop’s lackluster first-quarter results had been teased last month in the lead up to the company’s decision to sell 45 million shares. That program was also an at-the-market offering, in which its investment bank creates shares and sells them at market prices, with the proceeds added to GameStop’s balance sheet.
In a filing detailing plans to offer more shares, GameStop didn’t indicate any sales had begun. Based on Friday’s closing price, selling the full amount could net roughly $2.1 billion to go along with the company’s May haul and the $1.08 billion it had in cash and equivalents at the end of the last quarter. Jefferies LLC is acting as the sales agent on the offering, the filing said.
Before Friday’s sharp decline, some market watchers characterized GameStop’s efforts to raise cash during another meme-stock frenzy as savvy, while others viewed it as exploitative of existing shareholders. If its bankers sell the full offering, it would increase the number of shares outstanding by more than 20%, further diluting investors. Such sales also typically put pressure on share performance in the near-term.
Gill’s mysterious X posts, combined with portfolio checks on his DeepF—-ingValue handle on Reddit, sent investors piling into GameStop shares over the past four weeks. The stock’s surge over that stretch comes despite the stock sale and providing preliminary sales numbers that showed declining revenue. It had bolstered Gill’s apparent position in the company to more than $500 million through Thursday’s close, when accounting for common stock and call options, according to a Reddit post on June 6.
GameStop’s stock price “is completely divorced from its business,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. She did not plan to watch what she called the “spectacle” of Gill’s return.
Bullish Speculation
His livestream was accompanied by a disclaimer warning that the video would be opinion-based, along with familiar legalese saying past performance is not indicative of future results — something that hadn’t appeared in prior posts from the account.
“This YouTube channel is not under any obligation to update or correct any information provided in these videos,” the disclaimer read in part. “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 sparked conversations over whether Gill’s social media actions could amount to market manipulation. Online brokerage E*Trade was considering banning Gill from its platform, in part due to his influence over the stock, the Wall Street Journal reported earlier this week.
“What the government would need to 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.
On the livestream, Gill shared an E*Trade screen that matched the five million share stake and a stake of 120,000 calls at $20 expiring June 21. Using current prices the position would be worth nearly $260 million, data compiled by Bloomberg show.
“It’s safe to assume that the SEC will at least take a hard look at the trading,” Oliwenstein said.
--With assistance from Carmen Reinicke, Subrat Patnaik and Carly Wanna.
(Updates with share movement.)
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