The short squeeze that was the source of some controversy a few weeks back could have helped GameStop pay off hundreds of thousands of dollars in debt. However, it was restricted from doing so due to US regulations.
This news comes from sources close to the matter. According to the sources, the retailer explored the idea of selling some shares during this squeeze period. It got to the point that they had registered with the US Securities and Exchange Commission. This was in December when the plan was to shift $100 million worth of stock. The plan never moved forward from there though.
The issue was that the retailer decided that they were prohibited from doing this due to US regulations. They hadn’t informed investors of their latest earnings, making it difficult to move forward with their plan.
The retailer’s financial report is expected on or around March 26, 2021, showing both Q4 and full-year sales and earnings data.
The sources claim that the sales data for Q4 had already been mostly put together before the January stock squeeze.
It’s possible that GameStop could still make a decent amount of cash if they sold the shares now. However, the peak of the squeeze saw share prices of $483 per share, while they’re worth $51.10 now.
An online community called WallStreetBets worked together to create the squeeze on GameStop stock. They work on other shares throughout the year, and it just happened that this one was caught up by most games media outlets.
While other stock price increases also became part of this trend, it was GameStop that drew the attention of the SEC. The organisation is now investigating the lawfulness of the social media group’s market manipulation.
For the three months ending October 2020, GameStop posted a net loss of $19 million. Taking advantage of this squeeze could have seriously helped with their debt. The company has been recovering, albeit slowly, over the past two years though. With the launches of the PS5 and Xbox Series X/S, the full-year financial reports should look a lot healthier.