(Reuters) -GameStop reported a drop in sales and announced a more than $3 billion stock offer as it released its first-quarter report in advance, sending the shares of the video game retailer down sharply in volatile trading.
The company was set to post results on June 11, but published it on Friday morning, ahead of a much-anticipated livestream from meme stock influencer Keith Gill, a one-time supporter of the stock who recently reemerged, setting off a frenzy in the shares.
The company has been losing money for several years due to its reliance on brick-and-mortar stores at a time when customers buy video games and collectibles through ecommerce firms, and its latest quarter was no different.
Net sales fell to $881.8 million compared with $1.24 billion a year ago. It also missed market expectations of $995.3 million – an estimate from just two analysts polled by LSEG as the company is little-covered by Wall Street.
“The business model for GameStop is looking increasingly fragile to me, as it relies on people visiting physical stores whereas customers now are more likely to be looking to purchase games and the like online,” said Stuart Cole, head macro economist at Equiti Capital in London.
GameStop has not earned a profit since the fiscal year ended February 2018, sapped by the shift to online gaming.
The company did not say why it moved up its results and did not respond to a request for comment. Shares were down 23% in heavy activity on Friday.
In its latest quarter, its net loss narrowed to $32.3 million from $50.5 million a year ago, while its adjusted loss per share of 12 cents was higher than expectations of 9 cents.
However, the return of Gill, also known as “Roaring Kitty,” provided some impetus for GameStop to announce plans to sell up to 75 million shares, days after it made nearly $933.4 million by selling 45 million shares.
Since a post from an account belonging to Gill on social media network X on May 13, GameStop shares have more than doubled in value.
“They are taking advantage of the recent spike in share price to issue shares, which is a prudent move that takes advantage of the frenzy created by Roaring Kitty,” Wedbush analyst Michael Pachter said.
(Reporting by Jaspreet Singh in Bengaluru; Additional reporting by Ankika Biswas and Ananya Mariam Rajesh; Editing by Shilpi Majumdar and Arun Koyyur)