GameStop stock (GME) surged 25% on Tuesday after the video game retailer announced that it had raised nearly $1 billion from its latest equity offering. This spike in stock action is a reflection of the investor exuberance surrounding meme stocks, which are driven up by online buzz rather than traditional market fundamentals.
According to Steve Sosnick, Interactive Brokers chief strategist, in a normal market, people would be concerned about this kind of surge. He noted that companies typically sell stock when they believe it is overvalued, not undervalued. GameStop, a heavily shorted stock with short interest just above 21% of the float, took advantage of the meme rally in mid-May by selling 45 million shares and bringing in about $933 million.
The company stated that it intends to use the net proceeds for general corporate purposes, including potential acquisitions and investments. This move was seen as a smart one by some Wall Street analysts, given GameStop’s recent struggles with falling quarterly sales.
GameStop’s decision to sell stock coincided with a similar move by AMC Entertainment (AMC), another meme stock play. AMC raised $250 million through the sale of 72.5 million shares earlier in the month, and its shares rose 1% on Tuesday.
The surge in GameStop’s stock price over the past few days can be attributed to the reemergence of “Roaring Kitty,” a key figure in the meme stock frenzy of 2021. This recent rally comes after GameStop announced its equity offering, which initially caused shares to drop by as much as 30%.
Ines Ferre, a senior business reporter for Yahoo Finance, has been closely following these developments. For the latest stock market news and in-depth analysis, including events that impact stock movements, visit Yahoo Finance. Stay updated on the latest financial and business news by following Ines Ferre on Twitter at @ines_ferre.
