GameStop stock (GME) surged as much as 22% on Tuesday after the video game retailer said it raised almost $1 billion from its latest equity offering.
GameStop shares opened at around $23, well below the near-$65 level reached earlier this month during a short-lived meme rally.
Still, Tuesday’s stock action reflects investor exuberance when it comes to meme stocks, or those bid up through online buzz to the point that they become detached from fundamentals, according to one strategist.
“If this were a normal market, people would be a little freaked out,” Steve Sosnick, Interactive Brokers chief strategist, told Yahoo Finance.
He added, “You don’t sell stock into the market if you think your stock is undervalued. You do it when you think your stock is overvalued.”
GameStop is a heavily shorted stock, with short interest just above 21% of the float.
The company took advantage of mid-May’s unexpected meme rally, selling 45 million shares to bring in about $933 million, according to a Friday statement.
GameStop said it intends to use the net proceeds for general corporate purposes, which may include acquisitions and investments.
The offering was first announced on May 17 along with the company’s preliminary financial results, sending shares tanking as much as 30% that day.
The offering was seen as a smart move by some Wall Street analysts amid the video-game retailer’s struggling financials. GameStop’s quarterly sales fell sharply from the year earlier period, according to its most recent earnings report.
GameStop’s move to sell stock coincided with a similar move by fellow meme stock play AMC Entertainment (AMC). The theater chain also capitalized on the meme frenzy by raising $250 million through the sale of 72.5 million shares, earlier this month.
AMC shares rose more than 2% on Tuesday.
GameStop soared over a two-day span that started May 13 after the online reemergence of “Roaring Kitty,” the person who is seen as the kick-starter of the meme stock frenzy in 2021.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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