It’s been an interesting couple of months for GameStop stock… to say the least. And we have more big news to start our trading week off: Gamestop’s secondary stock offering.
The share offering has finally arrived after this meme “stonk” rose more than $400 per share in a single week in January, and has been up about 1,000% over the past three months as the short squeeze of the century.
But this isn’t our first rodeo with a situation like this, is it?
A little more than a week ago we saw ViacomCBS’s huge secondary offering.
This huge move on the stock gave it some popularity. But eventually it led to the massive Archegos Capital hedge fund collapse that shook up Wall Street last week.
So now this morning we wake up to the news of GameStop’s secondary stock offering. The company plans on taking advantage of the recent insanity we’ve seen with the stock.
An additional equity offering — also known as a secondary offering — is when a company issues more shares of stock after its initial public offering (IPO). The company will increase the amount of shares it has in the market to raise its equity, which in turn raises capital it can spend.
As I’ve said before, there are two things that usually happen when a company issues a secondary offering…
It will flood the market with new shares, which can cause the stock to sell off. On the bright side, the new offerings can be a good thing if the money is used to pay off debt and improve the company’s standing.
But GME’s share sale is a little different…
How GameStop’s Secondary Offering Differs From ViacomCBS’s
The video game company said Monday it may sell up to 3.5 million shares — worth about $1 billion in stock — after its Reddit-fueled short squeeze.
Instead of the usual secondary offering, GameStop will have an at-the-market (ATM) additional offering.
In a SEC filing that covers GME’s plan, it said“…we established an ‘at-the-market’ offering program (the ‘ATM Program’) that provides for the sale of shares of our Class A Common Stock having an aggregate offering price of up to $100 million, from time to time, through Jeffries LLC, as the sales agent under the ATM Program.”
How it went about this was so incredibly intelligent that I think every investor on Wall Street needs to see what the company has done…
Check out my short video below to learn more about GameStop’s secondary offering, and see how you could play it for potential gains. Be sure to share your thoughts in the comments section below.
And as always, email any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
P.S. By now, you’ve probably heard of the “GameStop Effect”.
Millions of traders in an online forum ganged up to buy shares of nearly worthless GameStop stocks… (they call them “stonks”) with trading apps like Robinhood.
And when the stock rose 800% due to the buying pressure, only a few people made millions of dollars while others got crushed.
But here’s the thing: There is ZERO reason to get taken to the cleaners with crazy moves like that.
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