Why GameStop Stock is Falling | What you Must Know

hey everyone me kevin here boy oh boy

gamestop is down about eight point five

percent in after hours despite

beating earnings expectations and

beating on the bottom line this has to

do

with a new share offering gamestop is

putting five million new shares on the

market for sale that'll raise about

1.38 billion dollars for them

which is massive amounts of money with

this they can pay off some of their

higher interest rate debt

and hopefully they'll be able to expand

their company and sort of re-imagine

their company

in the 10-minute earnings call we heard

this news which was not so great news

for existing shareholders

but remember that money does end up

going to the company even though it's

seven percent dilution and even though

right now the share price is down 8.5

percent

this is good for the company in the long

run they're replacing expensive debt

with basically free money in the form of

the stock market and when i say free

money i really mean

your money since you're the one who's

getting deluded as a shareholder

as now gamestop did talk about the fact

that they added a 70

sorry 700 000 square foot distribution

center

they talked a little bit about how they

plan on paying off debt

talked about their new former amazon

executive who's coming on as

chief financial officer and uh as

ceo ryan cohen was also elected by

shareholders as head of the board we

didn't get much color though

in the earnings call and this was a

little bit disappointing

we didn't get a lot of details on really

anything we didn't get details on nfts

on store revamps we heard that yeah

they're hiring people in different

fields

throughout the business but no breakdown

of online versus in-store sales

a lot of sort of detail missing in the

earnings call

we have we do know top-line numbers like

net sales growing 25

to 1.3 billion compared to the first

quarter of 2020 this is great

we've got gross margin at 25.9 percent

this was a decline of 1.8

percentage points and they have an

operating loss

of right now 40.8 million dollars that

is compared to a 108 million

loss compared to the first quarter of

2020 which obviously encapsulates march

which was the start of the pandemic now

they

are running a net loss of about 66.8

million dollars

in total and this 5 million share

offering comes after they raised 551

million dollars in

net proceeds through the issuance of

three and a half million shares

of common stock earlier this year now

jumping over to some of the technicals

for gamestop we are presently according

to s3 partners at 19.26 percent

short this is down from a recent peak

that we've seen around 22.4

shorten and of course if we go year to

date you'll see that the short interest

is substantially lower than that 149

percent that we previously sat at

this was of course the big gamestop

squeeze right here

and as we saw the short interest go down

we did see some price volatility

it's also worth noting when we look at

the put call ratio here this is a

screenshot from the bloomberg terminal

shout out to bloomberg

for allowing the sharing of this

appreciate that so we've got the put

call ratio here i'm going to hide myself

for a moment here

put call ratio once you're at one it

means you have an equal number of puts

to calls

when you're at point two six it means

for every uh one dollar

in calls we have we have point two six

uh dollars in puts you can see that put

action really peaked here at around 2 to

3

x call volume and

this this ratio has obviously

substantially come down

and so it appears as though gamestop is

being synthetically shorted

less than it previously had been at

least in regards to put to call volume

now keep in mind

put to call volume is just a snapshot in

time so

there are obviously many people that

could have substantial amounts of puts

still existing this is just new put

volume or trading volume

with puts now going to some of the

technicals obviously gamestop

is reaching some of its all-time highs

of course all-time highs were

realistically as high

intraday as 483 at one point

we did have a high of 380 before that

and a high of 413 the day after that

so uh at a 306 on the day we were

approaching these new highs

we are going back to about 275 now

thanks to the share offering

we are above substantially above the 142

support line

this was a support line that was pretty

powerful for gamestop for a while

so i would pay attention to this support

line here 142

you've got a triple almost quadruple

peak right here or touch

onto our support line so very strong

support at 142

a lot less support at these levels here

in the 200s all we

really have are prior resistance levels

which

maybe we could use again for example top

of the candle

here appears to be right at about 275

which is where we sit now but we have a

very brief period of time that we've

spent

in this level here so i'm a little

uncomfortable suggesting that as a

support level

maybe another support level could be

here at about 253

maybe 230 somewhere around here these

are going to be softer support levels

nothing as strong as that 140 level

where gamestop traded for a while

that does to me indicate that i i don't

believe we're going to revisit these low

levels over here

like gamestop sitting at 40 41.44

and so on uh and then instead we might

revisit this sort of 150 territory

140 territory in the near term if

gamestop continues to raise shares uh or

sell shares without providing

new reasons for uh adding more money or

investing short of just getting deluded

right

what we really want to see is gamestop

paint a vision of progress for the

future

to say hey you know what ape army we're

together on this

amc gme we're doing this together

very very important unfortunately right

now gamestop is not doing that i think

part of that is because

they honestly don't even know where

they're going with their brand yet

so they're putting the right people in

the right places in the meantime they're

potentially just trying to uh stand by

and uh

wait this one out and see what happens

which is a little frustrating as a

shareholder but

in time we'll get more insights from

gamestop so here's an update on why

gamestop is selling off a little bit

hopefully we get more clarity on their

exact plans we didn't get much color

today

we weren't really expecting to get much

but we certainly were hoping to get more

than just uh hey yep we're raising 5

million shares and we're working on it

it's kind of what we got now down about

7.36

at the time of this recording thank you

so much for watching and folks we'll see

in the next one

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