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GameStop Stock Slides After Wider Q3 Loss, SEC Trading Activity Subpoena

GameStop said it's looking at blockchain, NFT and Web 3.0 gaming opportunities in order to boost profits following a wider-than-expected third quarter loss.

GameStop Corp.  (GME) - Get GameStop Corp. Class A Report shares slumped lower in pre-market trading after the video game retailer, and meme stock favorite, posted a bigger-than-expected third quarter loss and unveiled detail of a Securities and Exchange Commission subpoena.

GameStop said its loss for the three months ending on October 30 was pegged at $1.39, nearly triple the Street consensus forecast, even as sales rose 29% from last year to $1.3 billion, which the group attributed to new brand relationships with companies such as Samsung, LG, Razer and Vizio.

GameStop said it ended the quarter with $1.4 billion in cash and just over $1.1 billion in inventory as it front-loaded investments to meet consumer demand over the holiday season while mitigating supply-chain bottlenecks.

"During the quarter, we focused on expanding our selection, accelerating delivery speeds, and improving the customer experience. We also made long-term investments in our infrastructure, talent, and technology," CEO Matt Furlong told investors on a conference call late Wednesday. 

"We believe our emphasis on the long term is positioning us to build what will ultimately become a much larger business relative to where we are in 2021," he added "We've also been exploring emerging opportunities in blockchain, NFTs, and Web 3.0 gaming."

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GameStop shares were marked 43.5% lower in early trading to change hands at $167.10 each. GameStop share have risen more than 900% this year -- but are down 46% over the past six months.

The Grapevine, Texas-based retailer added in a separate statement that it received an SEC subpoena for documents linked to an earlier probe into trading activity linked to the stock.

A detailed report from the SEC in October established that earned its meteoric 2021 rise as a result of positive investor sentiment, and not short-sellers, amid the meme-stock frenzy that began in January and pushed GameStop's market value to as high as $23 billion.

The SEC said that while short-sellers were active in betting against the stock, its rise was powered by investors who believe in the company -- and their use of 'game like' trading apps -- by professional traders scrambling to cover their short positions.

"Whether driven by a desire to squeeze short sellers and thus to profit from the resultant rise in price, or by belief in the fundamentals of GameStop, it was the positive sentiment, not the buying-to-cover, that sustained the weeks-long price appreciation of GameStop stock," the SEC said.

The report did not, however, address issues related to alleged market manipulation on social media websites or whether pressure was applied to online trading firms such as Robinhood  (HOOD) - Get Robinhood Markets, Inc. Class A Report to restrict access to certain stocks during the height of the meme-trading frenzy.