Note: This article has been updated on August 29 to clarify GameStop’s financial actions, specifically regarding the issuance of shares and the termination of its revolving credit facility. The original version of this article inaccurately described certain details related to the company’s debt and financial strategy.
After experiencing a renewed GameStop (NYSE: GME) mania during May and June, the largest benefactor wasn’t Keith Gill, aka ‘Roaring Kitty,’ but GME stock itself.
A surge in meme stock’s price on May 14 and June 6 coincided with Gill’s cryptic posts on X, hinting at his renewed interest in GameStop, later revealing that he holds a substantial portion of GME stock.
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The company reacted to the news by issuing 45 million new shares of its common stock on May 17 in an attempt to strengthen its balance sheet and raise cash for various operational needs.
So far, the plan seems to have worked, as GameStop announced on August 28 in its 8K form that it is terminating its $250 million revolving credit facility, a line of credit it no longer feels is necessary given its current cash position.
GME stock price chart
After starting 2024 with a $16 valuation, the renewed mania sent GME stock flying to almost $50 from May to June. During these periods of significant volatility, the GME holders caused short-sellers to lose almost $2 billion.
However, the recent period has brought stability for this video game retail company. The company closed the latest trading session on August 28 at $19.90 after suffering a 4.05% decline, which extended the losses of 11.56% from the previous five trading days.
Despite these losses, GME shares still trade in the green by 19.38% year-to-date (YTD).
What does closing credit facility mean for GME stock
After pushing its Q1 earnings report to June 7, GameStop revealed that, through the issuance of 120 million shares (including the 45 million announced in May), it raised $900 million in cash, boosting its cash reserves to $4 billion.
With the recent announcement that it has terminated its $250 million revolving credit facility, it is safe to assume that GME executives no longer feel that this agreement with the bank is needed and that the company’s cash pile will suffice for further operations and business-related activities.
There is potential for GameStop to report improved performance in the upcoming earnings report on September 4, which will provide further insight into the company’s recent financial moves.
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