GameStop (GME) stock took a hit with a 17% drop in early trading on Friday after the company reported quarterly results that fell short of analyst expectations. This news was accompanied by the announcement of a stock sale, coinciding with a highly anticipated livestream featuring “Roaring Kitty,” the alias of bullish retail investor Keith Gill.
For the first quarter, GameStop reported an adjusted loss of $0.12 per share, missing the estimated loss of $0.09. Net sales also saw a significant decline, dropping 29% to $882 million compared to analyst estimates of $995.5 million. These results were unexpected, as Wall Street was anticipating the quarterly report later in the month.
In addition to the disappointing financials, GameStop also filed to sell up to 75 million additional shares. This comes on the heels of a previous stock sale where the company raised about $930 million by selling 45 million shares.
The market reaction was further compounded by the recent surge in GameStop’s stock price, which had increased by 47% in the session before the announcement. This surge was driven by the news of “Roaring Kitty” scheduling a YouTube livestream, his first appearance since igniting the meme stock rally in 2021 with bullish content about GameStop.
This recent activity has brought scrutiny to Gill, with some calling for an investigation into his trading practices. Loop Capital Markets managing director Anthony Chukumba expressed concerns over Gill’s actions, particularly his timing of buying call options on GameStop and subsequent social media activity that influenced retail investors.
The regulatory spotlight intensified this week when the securities regulator in Massachusetts opened a probe into Gill’s GameStop trades. This investigation follows a report that executives at Morgan Stanley’s E-Trade platform were considering restricting an account linked to Gill.
Despite the rollercoaster ride of GameStop’s stock over the past month, analysts caution that the current meme stock action lacks the same level of retail investor interest seen during the 2021 rally. It remains to be seen how these developments will impact the future of GameStop’s stock performance.
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