GameStop plunges 27% as company says it plans to sell up to 5 million shares and discloses SEC request for information on trading activity

GameStop store New York City January 2021.JPG
  • GameStop dropped 27% on Thursday on the company’s plans to sell additional shares and as the SEC looks into trading activity of its stock.
  • The video-game retailer, whose shares are part of a meme-stocks rally, said it will cooperate with the SEC’s inquiry.
  • The company could sell up to 5 million shares.
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GameStop sank by nearly 30% on Thursday after the video game retailer said it may sell millions of shares and said the Securities and Exchange Commission has requested information as part of its investigation into the trading of its shares.

The company issued the updates late Wednesday alongside first-quarter financial results that beat Wall Street’s expectations.

Shares of GameStop on Thursday plunged 27% to finish at $229.39. The stock started falling in after-hours trade Wednesday as GameStop said it may sell up to an additional 5 million shares as part of a previous agreement with its sales agent, Jefferies. Investors are concerned about dilution, or that the value of shares already outstanding will decline. The sale of the shares would take place from time to time at or near market prices under the “at-the-money” agreement.

Another source of downward pressure was GameStop’s disclosure that SEC staff in late May requested the company voluntarily provide documents and other information as part of the regulator’s investigation into the trading activity of its securities and in the securities of other companies.

GameStop’s stock price has soared by more than 1,500% so far this year as part of a surge in so-called meme stocks — including AMC Entertainment, Bed Bath & Beyond, BlackBerry — that’s been driven by retail investors working together to force a short squeeze on hedge funds aiming to profit from bets that the companies’ share prices will fall.

“We are in the process of reviewing the request and producing the requested documents and intend to cooperate fully with the SEC Staff regarding this matter. This inquiry is not expected to adversely impact us,” GameStop said as part of its quarterly financial report.

GameStop late Wednesday said sales rose to $1.28 billion, higher than the $1.16 billion expected by four analysts in a FactSet poll. Its adjusted loss was $0.45 a share, narrower than its adjusted loss of $2.44 a share a year earlier and narrower than Wall Street’s forecast of a loss of $0.83 a share.

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XRP soars 28% as Ripple executives motion to dismiss SEC suit

Ripple Sign December 2020.JPG

Ripple Labs’ XRP token reached its highest point in over three years Tuesday morning after the cryptocurrency company executives filed a motion to dismiss the US Securities and Exchange Commission’s lawsuit against themselves and the company.

XRP gained 28% to reach a 24-hour high of $1.73 Tuesday. Earlier this month, XRP topped $1 for the first time since 2018 on the back of a broader rally in the crypto space. XRP’s price moves now make it the world’s fourth largest cryptocurrency by market capitalization.

Legal filings from April 12 show that CEO Brad Garlinghouse and chairman Chris Larsen filed a motion to dismiss the SEC’s lawsuit against them permanently. If granted, it would end the lawsuit against them.

The SEC lawsuit filed in December accused Ripple of effectively running a $1.3 billion unregistered securities offering with its sales of XRP, which the regulator deemed a security and not a cryptocurrency.

The motion to dismiss comes after two small victories for Ripple last week, when the court denied the SEC’s request for eight years of financial data belonging to Garlinghouse and Larsen, and rejected the subpoenas served by the SEC on a number of firms that had sought to obtain the executives’ financial records.

XRP isn’t the only cryptocurrency on a tear today. Bitcoin and Ether reached new all-time highs Tuesday morning ahead of Coinbase’s direct listing later this week.

Read more: A 29-year-old self-made billionaire breaks down how he achieved daily returns of 10% on million-dollar crypto trades, and shares how to find the best opportunities

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Robinhood pays $65 million to settle SEC probe over misleading communications with customers

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  • Robinhood agreed to pay $65 million to settle with the Securities and Exchange Commission over charges that the brokerage misled clients on its revenue from trades and the quality of its service.
  • The SEC alleged Robinhood made “misleading statements and omissions” about how it made money with market-makers. Robinhood, like other brokerages, sells its orders to high-speed trading firms for execution.
  • While Robinhood marketed its trades as commission-free and matching or exceeding its peers in quality, the brokerage provided inferior trade prices that cost clients tens of millions of dollars, according to a Thursday SEC press release.
  • The settlement relates to practices “that do not reflect Robinhood today,” Dan Gallagher, the brokerage’s chief legal officer, said in an emailed statement.
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Robinhood agreed to pay $65 million to settle Securities and Exchange Commission charges that allege the discount brokerage misled customers on the quality of its trading service.

The regulator argued Robinhood made “misleading statements and omissions” about how it made money with high-speed trading companies, according to a Thursday press release. Like other brokerages, Robinhood sells its orders to trading firms for execution in a process known as “payment for order flow”.

The SEC’s order alleges the brokerage routinely provided inferior trade prices, even as¬†Robinhood marketed its trades as commission-free and executed with quality that matched or beat peers. The second-rate prices have cost clients a total of $34.1 million even after accounting for the lack of commission fees, according to the SEC.¬†

Read more: Buy these 26 stocks poised to surge as China starts to dominate the electric-vehicle landscape, UBS says

“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” Stephanie Avakian, director of the SEC’s Enforcement Division, said in a statement. “Brokerage firms cannot mislead customers about order execution quality.”

The settlement ends a probe that examined Robinhood’s omission of order-flow revenue on its website from 2015 to 2018. Robinhood resolved the probe without admitting or denying the SEC’s charges.

The settlement relates to practices “that do not reflect Robinhood today,” Dan Gallagher, the brokerage’s chief legal officer, said in an emailed statement.

“We recognize the responsibility that comes with having helped millions of investors make their first investments, and we’re committed to continuing to evolve Robinhood as we grow to meet our customers’ needs,” he added.

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