(Reuters) – GameStop Corp’s shares fell 12% on Monday after the video game retailer said it could sell up to $ 1 billion in shares as it takes advantage of a dizzying rise in its shares this year due to a retail driven by the Reddit commercial frenzy.
The company said it would sell up to 3.5 million shares and use the profits to accelerate the shift in its business model to e-commerce, in a reform led by major shareholder and board member Ryan Cohen.
At Thursday’s closing price of $ 191.45, the “on the market” sale could bring GameStop up to $ 670 million. The company, however, is not required to sell shares for that amount, since programs on the market allow companies to sell shares for an extended period of time.
GameStop’s shares have risen more than 900% so far this year, giving the company a valuation of up to $ 34 billion at one point, while retail traders bet against the Wall Street hedge funds that had sold their shares.
Film operator AMC and airline operator American Airlines, which also benefited from the commercial frenzy fueled by Reddit in January, managed to sell shares, but GameStop failed because of regulatory restrictions.
GameStop has warned investors that buying shares in its offering could result in a “significant” loss if its share price falls.
The new prospectus on the market filed with the United States Securities and Exchange Commission replaces the December prospectus, in which GameStop had registered to sell $ 100 million in shares. The company said it did not sell any shares under the December prospectus.
GameStop said that Jefferies LLC is acting as its sales agent for the new offering with a commission of up to 1.5% of the gross sale price per share.
Separately, GameStop said global sales for the nine-week period ending April 4 increased by about 11%.
Its shares fell to $ 168.76 in the pre-market.
Reporting by Uday Sampath in Bengaluru; Editing by Arun Koyyur and Saumyadeb Chakrabarty