On May 28, GameStop (NYSE:GME) stock gained 25% after selling 45 million shares under its at-the-market program, raising $933 million. The company plans to use the proceeds for general corporate purposes. It sold the shares at $20.74 they trade now around $1. 

Thanks to the emergence of “Roaring Kitty” on May 13, GameStop shares are hot, as meme-stock investors hope for another massive spike like the one in January 2021. While I have no patience for most meme stocks, the ATM offering shows public companies still matter. Here’s why. 

The Private Capital Markets Rule

There has been much coverage in 2024 of pension funds and institutional investors moving away from equities and into other asset classes, such as bonds and private assets.  

In April, Bloomberg Opinion columnist Aaron Brown reported that Goldman Sachs estimates pension funds will withdraw $325 billion from stocks in 2024, on top of the $191 billion moved in 2023. 

“[I]nvesting in the S&P 500 leads to a 64% chance of pension funds losing ground over the next 10 years — increasing their underfunded ratio — while investing in 10-year Treasurys gives an 86% chance of falling farther behind,” Brown wrote on April 23. 

That’s pushed these funds to consider higher weightings in private assets. In February, the UK workplace pension Nest said it would double its private assets allocation from 15% now to 30% in the future.

There is no question that the bull run equities are on has pushed valuations considerably higher than their historical norms. And that has institutional investors reducing their allocation to stocks. 

As a result, the private capital markets rule, at least for now. However, stocks like GME demonstrate why equities will always be a big part of institutional investment portfolios. 

GameStop Gets Nearly $1 Billion in Additional Cash

No matter my opinion of GameStop stock or its savior, CEO Ryan “Chewy” Cohen, one has to be impressed with the company’s ability to move the share price higher despite a 15% increase in its share count to 351.19 million. 

As the company said on May 17, when it released its preliminary Q1 2024 results, it would finish the end of April with cash and cash equivalents of $1.08 billion at the midpoint of its results.

Add in approximately $914 million in net proceeds from the ATM — based on a 2% cost of the ATM — it has nearly $2 billion in cash, $603 million in total debt (most of it from operating lease liabilities), and net cash of $1.4 billion.  

Based on 351.2 million outstanding shares, it has about $4 in net cash per share. 

If GameStop had growing revenues and a profitable business, the cash position would make it a takeover candidate. However, with Q1 2024 sales expected to decline by nearly 30%, there’s no solution on the horizon to improve its business. 

Nonetheless, a privately held version of GameStop would likely not be in nearly as good a financial position without the ability to raise cash through ATM offerings.  

If you’re a longtime shareholder, especially one who bought at $80 in 2021 and still holds, the ability of a public company such as GameStop to make such a move is a tremendous godsend. 

Should You Buy?

The last time GME stock traded at level was January 2023, 16 months ago. Even though Ryan Cohen has been a director since January 2021, business hasn’t improved. 

Nothing, except for job cuts, has proven to improve the company’s overall financial condition, which is why only two analysts cover its stock. Both rate it a Sell, with a $7 target price.  

Given Cohen’s prospect of becoming the company’s portfolio manager and investing the cash like Sardar Biglari rather than improving the business, there is little hope that its shares will stay in the $20s for long. 

While GameStop’s ATM offering is generally a reason to remain invested in equities, it isn’t a reason to stay a long-term GameStop shareholder.

GME is a sell. Full stop. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.