GameStop’s Disappointing Q1 Results and Stock Sale Announcement Lead to Share Drop

Game Stop

GameStop shares fell as much as 17% during Friday’s early trading session. This followed disappointing financial results and an announcement about a stock sale. These announcements occurred despite a highly anticipated livestream from “Roaring Kitty,” the former alias used by bullish retail trader Keith Gill.

In its first quarter, GameStop reported an adjusted loss of $0.12 per share, below analyst expectations of $0.09. Net sales also fell to $882 million, which was below the forecasted $995.5 million. Wall Street had expected the financial results to be released later in the month.

Additionally, GameStop filed to sell up to 75 million more shares. Last month, the company sold 45 million shares, raising approximately $930 million.

Prior to these announcements, the stock had experienced a 47% surge, due to “Roaring Kitty” scheduling an anticipated YouTube livestream on Friday. This would be Gill’s first live appearance on the channel since his bullish posts and videos about GameStop sparked the meme stock rally in 2021.

On Thursday, after the market closed, a Reddit account associated with Gill, “DeepF***ingValue,” shared a screenshot showing a portfolio worth $586 million, including GameStop stock and unexercised options.

Earlier that week, the same user revealed a $175 million investment in GameStop, causing a rise in stock value.

GameStop shares have been experiencing significant fluctuations in value for the last month, as Gill re-emerged on social media. Some observers have called for an investigation into Gill’s activities. In an interview with Yahoo Finance, Loop Capital Markets managing director Anthony Chukumba questioned the timing of Gill’s call options on GameStop and the subsequent social media post, suggesting that such actions may be questionable.

Massachusetts’ top securities regulator told Reuters about an ongoing probe into “Roaring Kitty’s” GameStop trades.

The speculation ignited by Gill’s return reached Morgan Stanley’s E-Trade platform, with the Wall Street Journal reporting on Monday night that executives were considering closing an account associated with the screenshot. The following day, GameStop shares fell 5%, after rallying 180% over two days in mid-May, when “Roaring Kitty” first posted on X (formerly known as Twitter) since 2021.

Analysts caution that this current meme stock action does not resemble the retail inflows observed three years ago, indicating a more muted market response this time.