Shares of GameStop (GME) rose as much as 22% on Tuesday after the video game retailer said it raised nearly $1 billion from its latest stock offering.
GameStop shares opened around $23, well below the near $65 level reached during a short-lived meme rally earlier this month.
Still, Tuesday’s stock action reflects investor exuberance when it comes to meme stocks, or stocks that bid so high on online buzz that they become disconnected from fundamentals, one strategist said.
“If this were a normal market, people would be a little panicky,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance.
He added: ‘You don’t sell shares in the market if you think your shares are undervalued. You do it if you think your share is overvalued.”
GameStop is a heavily shorted stock, with short interest just above 21% of the float.
The company took advantage of the unexpected meme rally in mid-May and sold 45 million shares, raising about $933 million, according to a statement Friday.
GameStop said it plans to use the net proceeds for general corporate purposes, which may include acquisitions and investments.
The offering was first announced on May 17 along with the company’s preliminary financial results, sending shares tumbling as much as 30% that day.
The offer was seen by some Wall Street analysts as a smart move amid the video game retailer’s dire financial situation. According to its most recent earnings report, GameStop’s quarterly revenue fell sharply compared to the same period last year.
GameStop’s move to sell shares coincided with fellow meme stock play AMC Entertainment (AMC). The theater chain also capitalized on the meme frenzy by raising $250 million through the sale of 72.5 million shares earlier this month.
AMC shares rose more than 2% on Tuesday.
GameStop soared over a two-day period beginning May 13 after the online reemergence from “Roaring Kitty,” the person credited with kickstarting the 2021 meme stock frenzy.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.
