GameStop collapsed 40% on ‘$3 billion’ share sale, as Roaring Kitty meme-traders larked on live stream

GameStop (NYSE:GME) shares plummeted 40% in Friday’s dealing whilst Keith Gill, aka Roaring Kitty, goofed around in fancy dress on a live stream broadcast.

The livestream was practically trivial compared to the more tangible news of the day, which was that the company is selling an awful lot more new shares into the market.

Having sold 45 million shares for a total of $993 million last month, GameStop revealed it would now sell another 75 million shares to investors through an ‘at the market’ (ATM) facility.

It comes at a chaotic and confusing time for some investors.

GameStop at the same time yesterday reported first-quarter sales beneath Wall Street forecasts. It said sales for the three months period fell to $882 million from $1.24 billion last year – and the consensus of market analysts had been $995.3 million.

The retailer ‘narrowed’ its net loss to $32.3 million, or 12 cents per share, but again this underperformed versus market consensus forecasting, which anticipated a loss of only 9 cents.

$5 billion of cash

Analysts at West Coast stockbroker Wedbush reckoned GameStop’s share would see the firm trouser $3 billion of new capital, assuming an average price of around $40.

“Assuming the newest ATM transaction is completed at $40 per share, GameStop should have a cash balance of $5 billion or so,” Wedbush analyst Michael Pachter said in a note.

“With 426 million shares outstanding following the ATM, GameStop has cash per share of around $12.

“We expect the company to continue to lose money in its core business, but its high cash balance could throw off $100 million in annual interest income, largely offsetting losses for the next year or so.”

The Wedbush analyst, meanwhile, mused over GameStop’s potential use of its newly bargained cash pot.

“While having $5 billion in cash allows the company to pursue myriad options, it is unrealistic to assume it will be able to buy anything approaching its current $16 billion market cap for “only” $5 billion,” Pachter said.

He added: “We see no adjacent businesses that will allow GameStop to leverage its retail footprint, and the company has no particular expertise in anything other than retail sales.

“In addition, while interest rates remain high, interest income will more than offset losses, but interest income will likely decline in the future and losses will continue to grow.”

Then comes the spectacle of the ‘Roaring Kitty’ livestream.

One couldn’t presume or project Keith Gill’s motives or plans for the high-profile live stream event.

Gill himself said that “he had no specific game plan” for the livestream and instead he “was simply there to engage with the viewers.”

Over at Wedbush, meanwhile, Pachter noted that he suspected that the live stream would “keep shares elevated long enough for the company to complete its ATM, but with no clear strategy, we suspect the share price will once again begin to descend.”

In New York, GameStop shares closed Friday’s trading session down $18.33 or 39.38% at $28.22 – before afterhours dealing took the price down a further 3.7% to $27.16.

Wedbush, which rates GameStop as a ‘sell’, has a price target of just $13.50 per share.

Roaring Kitty live stream: What was said

Keith Gill, aka Roaring Kitty, claimed he didn’t have an agenda or game plan for the livestream.

And, indeed, in his first such event since 2021, there was no headline message or manifesto for his fellow meme-traders.

Instead, ‘jokingly’ wearing an arm sling and bandages on his face, he larked about a bit and answered some questions from the comments.

Over the course of the 50-minute (ish) live stream, there were a few small ‘takeaways’.

• He said he is confident in GameStops’s reinvention

• He said ‘stage two of his investment thesis’ is about the company's new management and strategic direction rather than its legacy business.

• He believes Wall Street has “an overemphasis” on the retail business, which he describes GameStop's “legacy business”.

• He’s solo. Gill claimed he is not working with any hedge funds or other institutional investors.

• He was broadcasting without a lawyer. Answering a viewer’s question, Gill confirmed that he did not have a lawyer present, but joked that maybe he should.

• GameStop is his only trade. Gill told viewers that his recently publicised positions in GameStop are all that’s in his portfolio.

• He said his ‘aggressive’ trading style ‘might not be suitable for everyone’.

Gill, who played a significant role in the original meme stock rally with his bullish comments on social media, had not previously live-streamed since 2021.

Roaring Kitty’s various recent social media posts have, however, been a significant factor in GameStop's volatile trading.

Earlier this month, Gill posted a screenshot on Reddit that showed a $116 million position in the video game retailer.

The post revealed that Gill holds 5 million shares with an average cost basis of $21.27 each, plus 120,000 call options worth $65.7 million, set to expire on June 21.

Gill’s return to social media, after a three-year hiatus, has reignited interest in meme stocks. His previous posts significantly influenced the retail trading frenzy around GameStop in 2021.

The Reddit post followed a series of meme videos posted to X (formerly Twitter) a number of weeks ago, which prompted a resurgence of so-called ‘meme trading’ through the month of May.