Shares of the Grapevine, Texas-based video-game retailer surged as much as 94% to an intraday high of $38.65 apiece before settling at $31.40. The last time shares traded at that level was in November 2015.
The spike appeared to be driven by a short-covering rally sparked by an agreement the company reached with activist investor RC Ventures regarding the addition of three board members.
Short interest last month reached 138% of shares outstanding, according to FactSet data. Short-sellers borrow shares in order to sell them with the hopes of buying them back at a lower price in the future.
The new directors, including Ryan Cohen, founder of RC Ventures and the online pet food supplier Chewy, all have extensive experience in e-commerce, online marketing, finance and strategic planning.
RC Ventures in September purchased 6.5 million GameStop shares to raise its stake to 9.98% with the goal of transforming the company into a major e-commerce player that sells a wide variety of merchandise with fast shipping.
The attempt to turn around GameStop’s business comes at a critical time for the company, which has suffered through store closures amid the COVID-19 pandemic at a time when more users were already purchasing their video games online.
GameStop on Monday reported comparable sales for the nine weeks through Jan. 2 rose 4.8% from a year ago, bolstered by a 309% increase in online revenue. Total sales were down 3.1% as the number of store locations decreased 11% during the pandemic.
GameStop expects demand for the new Microsoft Xbox and Sony PlayStation gaming systems to drive sales into 2021 once supply-chain constraints ease.
Shares were up 5.89% this year through Tuesday, outperforming the S&P 500’s 1.2% gain.