Raise money while you can, not when you must.
Not enough companies live by the creed. They should, even if it annoys traders and some investors. I've watched executives have to raise money from a point of weakness. The results weren't pretty. Excessive discounts, crippling warrants, and months or years of good news needed to clear out toxic financing.
In the current market environment, I'm encouraged to see many smaller companies that are in growth mode, fighting to scale to a point of profitability, raise capital. Admittedly, I'm not a fan of the raise capital "for general corporate purposes," so I have my limits. It can be good to raise cash simply for the point of having cash, but this is best done when a company's stock has detached from reality and gone atmospheric.
If I see a raise done with a purpose behind it, I'm more likely a buyer than a seller. Show me a goal, a visual, a proper use for the money, and I'm intrigued. Give me general corporate purposes and I'll pause. That second one doesn't mean I'll avoid or sell a name, but I better have a solid understanding of the business or I'm looking elsewhere with my dollars. If a plan is presented with a raise, then I'm going to keep my focus on that name initially. Obviously, if it is a biotech company and the money is being raised to fund a meteor mining space rocket, then it's probably best to step back, so there are limits.
Speaking of raising money, GameStop (GME) is finally out with a filing. The company filed to sell up to 3.5 million shares via an at-the-market (ATM) equity offering. The use of the ATM hints, in the glass half empty scenario assumes that the underwriter, Jefferies, isn't viewing this as an offering that can be placed all at once with institutions or even sold easily into the retail market as a lump sum. Granted the half glass full views the ATM as a chance to capture stock spikes and sell into those. My best guess is that the bears will view it the first way and the bulls the second way.
Again, I think many folks, too many folks, are going to tell themselves what they need to hear on the offering to feel better about their position. Raising $500 million will certainly help GameStop. The sales numbers released this morning didn't do anything for me in terms of a bullish view on the legacy business, but GameStop isn't about the legacy business at this point. Whether long or short the company, it should be based around what you think Ryan Cohen and company can do with the existing assets and the influx of cash to transition the business. I think they are starting in a huge hole in a highly competitive market with more nimble and advanced foes. If the market cap weren't above $10 billion, I might look closer.
Honestly, I probably need the market cap closer to $5 billion, or around $75 per share, to see the risk-reward getting even somewhat attractive and that's after the company raises $500 million, but this is a cult stock so the odds of me seeing that are small. I have a few no-cost ratio put spread lottery tickets. I don't lose sleep over them as I acquired them when option prices broke. I never expect them to pay but I got paid to buy them so I simply need to wait out the last bits of decay. Until then, I'll keep an eye on it but nothing more.