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GameStop shares drop, company plans to offer $1B stock sale

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Yahoo Finance's Julie Hyman, Brian Sozzi and Myles Udland break down GameStop's latest share sale plan.

Video Transcript

JULIE HYMAN: One area, though, not seeing that strength is in GameStop. The company, at long last for those who are waiting for this, taking advantage of the rally that, well, that had been happening in the stock, to say they're going to be selling some shares, up to 3 and 1/2 million for about a billion dollars, up to a billion dollars is how much they're going to raise.

As we know, the company's also been shuffling management and trying to rethink what GameStop fundamentally is, even as there is still sort of trading that goes on that's separate from the fundamentals. Myles, it's interesting that they waited this long. Perhaps they needed to get rid of some of the management that was unwilling to do this, although we sort of have to read between the lines, don't we, for all of this?

MYLES UDLAND: Yeah, I mean, look, we discussed on this program how at the height of the mania, the problem with the mania is there was really nothing that as a management team you could credibly do. I mean, look at what happened with Viacom. The stock had ramped up ostensibly because people were excited, I guess, about Paramount Plus. Now we found out all the Archegos stuff with that story. And we all know why that story has gone the way it has gone. GameStop not so dissimilar in that it was market machinations outside of the company's control, sort of leaving that prior management group with no choice but to sit on their hands.

But as you mentioned, Julie, we've seen a considerable cleaning of house in the GMEC sweep over the last six weeks, putting a management team in place that has a plan, is going to work with Ryan kind of on his team on where the business is headed, and thus can credibly come to market and say, we are raising a billion dollars at these levels, not because the stock is high and we just want to hit the bid, but because we have a plan on what we are going to do with the money.

Six weeks ago-- I guess it's almost two months ago now that we had all the-- more than two months ago when all the GameStop stuff really popped off-- there was no credible plan in place that the management team could have said, here is why we are raising money at these levels. So I think with everything they've done to get to this point to then come to market and raise some capital, you know, they've alleviated, Sozzi, what-- maybe they'll get questions from the SEC.

But I think, again, if you've done this some time back, the SEC will be like, hey, guys, what are we really doing here? Why are we doing this? What's going on? Who do we need to talk to? And I don't really think that that comes into play at this point. Should the stock be at 170? I mean, who really knows? But the stock has now been at this level for a couple of weeks, really, a month. So, you know, it's, again, credible is the word I've kept coming back to because there's at least a plan in place. You can at least defend the decision, I guess, to come to market here.

BRIAN SOZZI: Well, outside of the share offering, Myles, GameStop also dumping on our plates that sales for the nine weeks ended April 4th were up 11%. Sales in February up 5.3%, March, up 18%. And you know what? You know what that's probably bullish for? Not necessarily GameStop. It's a Microsoft. It's a Sony. It's a Nintendo. Because all these new consoles appear to be selling well through a GameStop.

I will also add this, too. I don't know who is buying these consoles at a GameStop. My local GameStop is right next to a jam-packed Chipotle. I never see anyone in GameStop, Myles. They are not going from Chipotle into GameStop. It's just not happening in my local location. But I know there's, what, 40,000 more GameStops around the world. So I guess they're going there.

MYLES UDLAND: It's an e-commerce play.

JULIE HYMAN: I think they are. It's an e-commerce play, yes. We'll see if that ever actually--

MYLES UDLAND: [INAUDIBLE]

JULIE HYMAN: --ends up--

MYLES UDLAND: Multi-channel.

JULIE HYMAN: --materializing.