GameStop is trying to raise $1.5 billion without revealing its e-commerce strategy

GameStop is shuttering its stores without a clear e-commerce plan.
GameStop is shuttering its stores without a clear e-commerce plan.
Image: Reuters/Carlo Allegri
We may earn a commission from links on this page.

GameStop aims to be more like Amazon. The meme stock darling, a formerly ailing brick and mortar video game retailer, says it will undergo an e-commerce transformation in the coming months. To pull it off, the company announced on Wednesday (June 9) during an earnings call that it planned to issue 5 million more shares of stock and it had hired two Amazon executives to serve as its new chief executive officer and chief financial officer.

But that was about as far as GameStop was willing to go in discussing its strategy to reinvent itself as an e-commerce success. During the company’s earnings call this Wednesday, only one speaker, outgoing chief executive George Sherman, spoke for just 10 minutes before ending the webcast without taking any questions from outside analysts.

GameStop’s barebones earnings

That may suit the company just fine. Since the beginning of the year, GameStop’s stock price has soared, rising 1,600% even as it told federal regulators it has “not experienced any material changes in our financial condition or results of operations.” Analysts’ questions would only have raised difficult questions about how the company expected to win a saturated online market for video game against Amazon, big-box retailers, and gaming platforms, which increasingly sell directly to customers.

Gamers are increasingly buying video games online, but they’re often downloading them directly to a console or computer, or subscribing to something like Microsoft’s Xbox Game Pass. That’s left sales of physical cartridges for consoles such as the elusive Playstation 5 as one of the few remaining growth areas for the retailer which soared to prominence after traders on WallStreetBets, a community largely centered on Reddit and Discord, went to battle against Wall Street short-sellers in January.

GameStop has revealed a few things: It is executing “strategic de-densification efforts” (i.e. closing 12% of brick-and-mortar stores this quarter), according to the company’s earnings report, and opening a new fulfillment center in Pennsylvania to ship out its products. The two new executives from Amazon (as well as newly elected chairman and former Chewy co-founder Ryan Cohen) should better understand e-commerce, but calling this a “digital transformation”—as GameStop has repeatedly done—might overstate the effort. Closing stores and improving shipping can only get the company so far as an e-commerce strategy.

New shares for Reddit investors

GameStop has been slow to capitalize on its soaring stock price compared to fellow meme stock AMC which has issued more than 100 million new shares of stock this year. But on Wednesday, GameStop announced it would issue 5 million new shares, its second offering in two months, potentially worth $1.5 billion at today’s share price (GameStock’s stock price dropped about 7% after the announcement). The company raised $550 million by selling 3.5 million shares in April.

In its earnings report today, GameStop told investors that the money is being used for its e-commerce transformation as well as for “general corporate purposes and further strengthening the balance sheet.” That gives investors few specifics about the “transformation” beyond a new team committed to trimming GameStop’s balance sheet.