The GameStop shares have plummeted for the third consecutive day after the company announced its intention to sell up to 45 million shares, further weakening the meme-fueled rally that had sent the stock soaring earlier in the week.
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Summary
GameStop ready to sell millions of shares to raise funds
As anticipated, after the company announced its intention to sell up to 45 million shares, GameStop Corp. shares have dropped for the third consecutive day.
In pre-market trading, stocks fell by as much as 25% after the announcement of the possibility of selling class A shares in an open market deal and a decline in preliminary net sales for the first quarter.
The title has almost canceled out the rally that had made it rise by 179% at the beginning of the week.
On Friday, GameStop reported preliminary net sales for the first quarter ranging from 872 million to 892 million dollars, compared to 1.2 billion dollars in the same period of the previous year.
Even AMC Entertainment Holdings Inc., involved in the recent volatility, fell 9.9% in early trading today.
At the beginning of the week, AMC had used the rally of its shares to reduce debt, completing a previously announced stock offering.
The trading intensity that fueled the rally last week has significantly decreased. Giacomo Pierantoni, head of data at Vanda Research, stated:
“Purchases of GME and AMC by retail investors have seen a significant decrease. GameStop has recorded about $5 million in inflows in the last two days, while inflows in AMC were almost non-existent on Thursday.”
The return of “Roaring Kitty”: the rally and the mini bubble destined to collapse
The return to social media of “Roaring Kitty”, pseudonym of Keith Gill, who had fueled the retail buying frenzy in 2021, has triggered the latest rally.
The high volatility and heavy options activity have brought back flashbacks of 2021 to Wall Street investors, when retail traders bet on GameStop and AMC.
Pushing both stocks to record levels. However, this time the conditions are different. Options activity for GameStop has decreased, while that around AMC stock has more than halved compared to Monday’s peak.
Pierantoni has concluded:
“It seems to me that the mini bubble is collapsing. When flows deviate from an exponential growth model and decrease rapidly, it indicates that sentiment is rather fragile.”
