GameStop (GME) stock saw a significant rise of up to 22% on Tuesday, following the announcement that the video game retailer successfully raised nearly $1 billion through its latest stock sale.
The stock opened at about $23, a notable decline from the peak near $65 reached earlier this month during a brief meme stock rally.
This rise underscores investors’ current enthusiasm for meme stocks, those that gain significant traction online and are often decoupled from their fundamental value, according to market strategists.
“If this were a normal market, people would be a little scared,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance. “You don’t sell stocks in the market if you think they are undervalued. You do it when you think they are overvalued.”
GameStop remains a heavily shorted stock, with short interest exceeding 21% of its float.
Taking advantage of the surge in meme stocks in mid-May, GameStop sold 45 million shares, raising approximately $933 million, as noted in a Friday announcement. The company plans to use the net proceeds for general corporate purposes, including potential acquisitions and investments.
The stock offering was initially revealed on May 17, along with the company’s preliminary financial results, leading to a 30% drop in shares that day.
Some Wall Street analysts saw the stock sale as a strategic move amid GameStop’s financial challenges. The company’s latest earnings report revealed a significant drop in quarterly sales compared to the previous year.
GameStop’s stock sale coincided with similar moves by meme company AMC Entertainment (AMC), which also raised $250 million by selling 72.5 million shares earlier this month. AMC shares rose more than 2% on Tuesday.
GameStop’s recent rally began on May 13, fueled by the online reappearance of “Roaring Kitty,” a key figure in the 2021 meme stock phenomenon.
Also read: GameStop Stock Soars Nearly 100% as Meme Stock Comes Back