Here’s why GameStop reportedly decided not to cash in on Reddit rally

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GameStop considered cashing in on the recent Reddit-fueled rally in its stock price — but regulatory concerns stopped the retailer from pulling the trigger, a new report says.

The Texas-based video-game chain weighed the possibility of selling new stock as rookie traders on Reddit’s WallStreetBets forum pumped up its share price in their war against short-selling hedge funds, Reuters reported Thursday.

GameStop reportedly held back on the stock issuance even though it filed paperwork with the SEC in December to sell up to $100 million worth of shares. It did not exercise that option amid the recent market craze, according to Reuters.

Such a sale could have raised hundreds of millions of dollars that GameStop could have used to pay down its hefty debt load, which stood at $216 million as of Oct. 31, the report said.

But GameStop ultimately concluded that the timing of the rally created too many potential regulatory and logistical headaches, according to Reuters, which cited three unnamed people familiar with the matter.

The company would have had to release preliminary earnings info ahead of schedule to move forward with a stock offering in compliance with Securities and Exchange Commission rules.

But GameStop’s last fiscal quarter was coming to a close just as its shares climbed to a peak of $483 in the last week of January, and it wasn’t slated to release its earnings report for the three-month period for several more weeks, the news agency reported.

Further complicating matters, the SEC has said that it will examine how companies have sold stock to capitalize on the “Reddit rally” and has asked firms to give investors more information about potential risks, the report says.

GameStop’s shares were down about 3.5 percent at $49.39 as of 11:56 a.m. Thursday — roughly triple their price at the time of the company’s December filing but down significantly from the height of the Reddit rally.

GameStop did not immediately respond to a request for comment Thursday.

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