Today is a difficult day for investors to esports entertainment (NASDAQ:GMBL). It turns out that the company revealed yesterday that it was planning a public offering of its common stock. In addition to this, Esports Entertainment will issue warrants that will allow holders to purchase the company’s common stock. Today, GMBL stock traders are reacting to this news by dumping their shares.
In the 2020s, many publicly traded companies focused on esports and online gambling. Esports Entertainment is one such company. It has offices in New Jersey, the UK and Malta.
The company claims to be “well positioned to help fans and gamers stay connected and involved in their favorite esports.” However, it takes money to make money in the esports market. To this end, Esports Entertainment intends to issue common stock and warrants to the public.
It is a simple and straightforward way to raise capital, which can be used for a variety of purposes. However, sometimes investors don’t like companies doing stock sales – and today we are witnessing that.
What’s going on with GMBL shares?
Very soon after financial markets opened in the US, GMBL stock slipped 12% and has since fallen as much as 20%. It was only a 9 cent move, but that’s big for a low priced stock.
Esports Entertainment shares were trading at $4 at the start of 2022. More recently, shares have fallen below 40 cents – a painful loss, no doubt, for loyal Esports Entertainment investors.
So what’s bothering today’s GMBL stock traders? For one thing, the press release lacked specific details that investors would surely like to know:
“The offer is subject to market and other conditions, and there can be no assurance as to whether or when the offer will be able to be completed, or the actual size or terms of the offer. .”
Along with the uncertainty, Esports Entertainment investors are likely concerned about stock dilution resulting from the issuance of common stock and warrants.
This, of course, outweighs the benefits of eventual capital raising. So today is not a good day to hold GMBL shares. As they say in sports and gambling, you win some and you lose some.
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As of the date of publication, David Moadel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.