GameStop Rises as Zero-Debt Plan Boosts Bets on Turnaround

GameStop Corp. climbed Wednesday after it took a step to retire nearly all its existing debt as part of its transformation from a brick-and-mortar retailer into an e-commerce marketplace.

The stock rallied 18% to $166.53, snapping a seven-day slide, for its biggest jump in 2 1/2 weeks. The video-game retailer said late on Tuesday it’s redeeming $216.4 million of senior notes, following a move to retire $73.2 million in debt last month.

More than 21 million shares changed hands Wednesday, double what had been seen over the past two weeks. While trading volume has slowed from the eye-popping activity over recent weeks, Gamestop shares are still up nearly 800% this year, bringing the company’s valuation to almost $12 billion.

GameStop Rises as Zero-Debt Plan Boosts Bets on Turnaround

The video-game retailer is in the midst of a turnaround, spearheaded by activist investor Ryan Cohen, shifting from a brick-and-mortar company and into an e-commerce marketplace able to compete with the likes of Amazon.com Inc..

Earlier this month, the company announced plans to offer as much as $1 billion in additional shares. The extra cash cushioning, combined with fewer debt obligations may contribute to more favorable terms for the company in dealings with suppliers and partners.

“Debt retirement is what they should have focused on in the first place,” Wedbush analyst Michael Pachter said in an email. “That puts them in a very secure financial position.”

Volume Pick-Up

Bullish options on the video-game retailer were more heavily traded in Wednesday’s session than recent weeks. The increase in small-lot calls could signal a return of the same group of investors who were behind January’s epic short squeeze, according to Susquehanna derivatives strategist Chris Murphy.

GameStop’s rally stood out from peers that have captivated retail investors as meme stocks were mixed Wednesday. While movie-theater operator AMC Entertainment Holdings Inc. climbed, cannabis stock Sundial Growers Inc. and Palantir Technologies Inc. dipped.

GameStop has been hit by the video-game industry’s shift to online distribution. The company reported disappointing fourth-quarter earnings last month.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.