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Why GameStop Stock Climbed Today

By Joe Tenebruso - Apr 27, 2021 at 5:13PM

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The video game company is cashing in on its popularity among investors.

What happened

Shares of GameStop (GME -2.58%) rose 5.2% on Tuesday after the game retailer announced the completion of a sizable stock offering. 

So what

GameStop shared its plan to sell its stock at prevailing market prices with investors back on April 5. It ultimately sold 3.5 million shares at roughly $157 per share. The offering generated approximately $551 million in cash proceeds, which GameStop will use to pay off the remainder of its long-term debt and fund its digital growth initiatives.

Rolls of dollar bills rising in a stair-step manner.

Investors applauded GameStop's capital raise. Image source: Getty Images.

GameStop is in the midst of downsizing its traditional retail store base. Its brick-and-mortar sales have been decimated by the video game industry's shift to digital downloads in recent years. GameStop is seeking to build out its e-commerce operations so as to better compete with Amazon's Twitch and other online gaming platforms.

Now what

The share sale was made possible by a massive Reddit-fueled rally in GameStop's stock price earlier this year. The gains were sparked in part by the appointment of Chewy founder Ryan Cohen to GameStop's board of directors in January. Cohen, who is now the company's largest shareholder, is slated to become chairman in June. He's spearheading GameStop's online transformation, which he hopes to accelerate with the company's newfound cash.

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