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GameStop shares rose more than 6 percent in early trading Tuesday after the company announced it raised $551 million through a stock sale to speed up the company’s turnaround effort.
Shares of the company were up more than 11 percent in premarket trading after the announcement, before paring some gains once the markets opened.
The video game retailer first announced the at-the-market offering of 3.5 million shares earlier this month. It’s one step by the company to benefit from the head-turning rally that’s sent the stock soaring almost 800 percent this year.
GameStop said the cash will be used to “continue accelerating GameStop’s transformation.” The company said earlier this month that Ryan Cohen, billionaire entrepreneur and co-founder of pet food online retailer Chewy, would become chairman of GameStop later this year. Cohen, who is also manager of activist investor RC Ventures, has been building a stake in the company since last year in an effort to push the company to shutter unprofitable stores and focus on e-commerce growth.
Cohen’s involvement in the company and his attempts to shake the 37-year-old firm up helped lead to the Reddit-fueled explosion of the stock in January, when retail traders created a massive short squeeze in GameStop, sending shares up 400 percent at one point. The Grapevine, Texas-based retailer traded at less than $20 a share at the start of the year.
The capital raise comes amid a major managerial shakeup. GameStop announced last week that its CEO George Sherman will step down by July 31. It said the board is searching for possible replacements who can help with the e-commerce push. The company also announced that it hired former Amazon and Google executive Jenna Owens as its new chief operating officer.
GameStop recently brought on several executives from Amazon, Walmart, QVC and Chewy for top positions. Chief merchandising officer Chris Homeister resigned from the business last month and Chief financial officer Jim Bell announced his resignation in February, as the company searches for a successor with more of an e-commerce background.
GameStop said earlier this month in a securities filing that it was nominating Larry Cheng, the first investor in Chewy, and Yang Xu, an executive at Kraft Heinz, to its board, as well.
Despite the turnaround effort, shares of the company remain far higher than consensus estimates on Wall Street. According to data compiled by the Wall Street Journal, the average price target on GameStop among major analysts is $46.50, far below the stock’s current price of almost $180 per share.