
### Introduction
GameStop (NYSE: GME) announced that it intends to sell up to 75 million Class A common shares of its own stock, valued at $0.001 per share, in compliance with an Open Market Sale AgreementSM (Sales Agreement) dated May 17, 2024, with Jefferies LLC. This sale follows the previous sale of 45 million shares, which generated nearly $933.4 million in total gross proceeds. With this move, they hope to cash in on the current market for shares while also providing more liquidity in their stock.
#### Description of the Sales Agreement
Pursuant to the terms of the sales agreement with Jefferies LLC, GameStop has the right to offer and sell shares through Jefferies as its sales agent. Currently, the company has the arrangement in place to sell 45 million shares. The company now plans to offer and sell as many as 75 million extra shares with the updated prospectus supplement.
Stock prices and market volatility
The New York Stock Exchange trades GameStop under the symbol “GME.” When the stock closed on June 6, 2024, its last reported sale price was $46.55 per share. The stock has been extremely volatile price-wise, trading between $10.01 and $48.75 from February 4, 2024, through June 6, 2024. Throughout this time period, approximately 1.7 million to just under 207 million shares were traded on an average daily basis. GameStop disclosed that it did not experience any significant factors that could have caused it to report wild fluctuations in its business (BFM).
### Risk factors for investors
GameStop stock has had extreme price fluctuations since January 2021 that appear unrelated to the company’s underlying business fundamentals. Such volatility can be potentially disastrous to investors hoping for a return or gain on their stock purchase, as sudden drops in the stock price could result in large losses. The prospectus supplement’s “Risk Factors” section encourages investors to delve deeper into the potential risks that could impact their respective businesses.
### SALES METHODS AND AGENT COMPENSATION
Under this prospectus supplement, the sales of GameStop’s common stock will be deemed an “at-market offering,” as defined in Rule 415(a)(4) under the Securities Act of 1933. Jefferies LLC is not required to sell any specific number of shares, but it will use its commercially reasonable efforts to sell the shares on GameStop’s behalf. Each sold share will earn the sales agent a commission of up to 1.5% of the gross sales price. Furthermore, we expect Jefferies LLC to be considered a “underwriter” under the Securities Act, and we will compensate it with underwriting commissions or discounts. GameStop has agreed in the sales agreement to indemnify the sales agent and provide for contributions to the sales agent under the Securities Act.
### Conclusion
GameStop said it plans to use the new share sale to take advantage of market conditions and give the company greater financial flexibility. This shift may present an opportunity for the company, but it carries significant risk due to the company’s volatility. Investors should carefully review these factors before making an investment decision, and only consider taking a long position on GameStop after examining the risks detailed in GameStop’s offering circular.
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