GameStop no longer needs banks. It has you.
The retailer terminated its ability to borrow $500 million from banks because investors gave it all the money it needs.
GameStop announced that it was voluntarily terminating its access to a $500 million credit facility in a filing released after the close on Wednesday, when the rest of us were busy obsessing over Nvidia’s earnings.
The reason is simple. GameStop doesn’t need banks to give it money. It has you. Well, maybe not you exactly, but either retail investors who were looking to cash in on rounds of meme stock mania or institutional investors trying to ride the momentum.
“After giving effect to the termination, the Company’s principal sources of liquidity will be cash from operations and cash on hand,” according to the filing.
During the second quarter, the company banked a little over $3 billion in less than a month through a 45 million share offering followed by a 75 million stock sale after the return of Keith Gill (aka Roaring Kitty) ignited a massive rally in the stock.
The company was as upfront about its intentions as it could be, saying there was no good reason why its stock went up like it did.
It’s possible, if not likely, that GameStop is making more money off of its cash holdings than its actual business operations at this point.
When borrowing from a bank, that’s essentially creating money out of thin air that the company has to pay interest on. Isn’t it so much better to create shares out of thin air, sell them for more than they’re worth, and not only not pay any interest at all, but be paid interest on the cash you just received?
I guess the ends justify the memes.
