GameStop Reportedly Failed To Capitalize on Reddit-Fueled Surge Over Regulatory Concerns

GameStop got a huge financial boost thanks to a Reddit-fueled short squeeze of its stock in January. But according to a report from Reuters, the beloved video game retailer never capitalized on it.

Due to concerns over regulatory restrictions, Gamestop Corp decided against selling hundreds of millions of dollars worth of stock. As users of the sub-Reddit r/wallstreetbets sparked issues for hedge funds and short sellers, people familiar with the internal workings of GameStop have suggested the company couldn’t do much but watch it happen. GameStop’s market value shot up from $1.4 billion on Jan. 11 to $33.7 billion by Jan. 28.

The company could have raised millions through a stock sale to pay its $216 million debt pile to fund future business endeavors, especially as its brick and mortar stores continue to see declining sales, but GameStop chose not to do so. Wall Street pundits had encouraged GameStop to sell shares, but now it’s perhaps too late for any money to be made. As of this week, GameStop has a market value of $3.6 billion, suggesting interest from amateur traders has dwindled.

Due to U.S. financial regulations regarding the sales of shares, GameStop did not sell any as it was privy to information not yet available to the public. When stock sales take place, the SEC requires companies to disclose such information. This information was in relation to the company’s fourth fiscal quarter, which ended in January. If Gamestop did go ahead with a stock sale by sharing its preliminary earnings, it still risked violating regulations with the SEC keeping a close eye on companies taking advantage of particularly volatile stocks.

“They were two and a half months into their quarter when all this stuff took place,” explained University of Pennsylvania’s Wharton School finance lecturer David Erickson. “It’s so deep in the quarter that from a legal and corporate governance perspective they would likely be obligated to pre-announce some high-level financial information for the quarter. And that can’t be prepared in just a week.”