GameStop (GME) no longer for sale, stock crashes over 20%
Shareholders of GameStop are in for some pain today as the stock crashes over 20% on the news of no buyout of the struggling video game retailer.
GameStop shareholders were welcomed with a rude awakening this morning as the company has announced that they are no longer pursuing an acquisition. This comes just a few weeks after the stock jumped on rumors of a potential imminent sale of the struggling video game retailer.
Here's the full statement from GameStop Investor Relations:
GameStop Concludes Process to Pursue Sale of Company
GRAPEVINE, Texas, Jan. 29, 2019 (GLOBE NEWSWIRE) -- GameStop Corp. (NYSE: GME) today announced that its Board of Directors has concluded its previously announced efforts to pursue a sale of the company in conjunction with its broader review of strategic and financial alternatives.
In June 2018, GameStop’s Board, together with outside financial and legal advisors, commenced a review of a wide range of alternatives to enhance shareholder value. The Board undertook a comprehensive review process, including discussions with third parties regarding a potential sale of the company. GameStop’s Board has now terminated efforts to pursue a sale of the company due to the lack of available financing on terms that would be commercially acceptable to a prospective acquiror.
As part of the Board’s review process, as previously announced, the company sold its Spring Mobile business. This transaction was completed on January 16, 2019 and generated approximately $735 million in immediate cash proceeds. The Board continues to evaluate the optimal use of these proceeds, which could include reducing the company’s outstanding debt, funding share repurchases, reinvesting in core video game and collectibles businesses to drive growth, or a combination of these options.
Furthermore, the Board is continuing its search process to appoint a highly qualified, permanent CEO and is working with a leading executive search firm.
I have previously recommended buying GameStop's stock, and will likely be updating my rating for the stock when the next Game Trader analyst report comes out. The company has yet to find a replacement CEO, and still finds itself with a ton of secular headwinds. Competition from online and larger retailers combined with digital downloads of video games might be too much for GameStop to handle while pivoting to collectibles and exclusives. There are much larger and better run players in retail, and this board of directors has shown very little to inspire confidence in shareholders. While the stock appears cheap on a number of valuation metrics, it could very well be a value trap if revenues materially decline going forward.
GameStop (GME) shares are down 26% at the time this article, and sit at multiyear lows.
Full Disclosure:
At the time of this article, Asif A. Khan, his family members, and his company Virtue LLC had the following positions:
Long GameStop via GME call options
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replyAsif Khan posted a new article, GameStop (GME) no longer for sale, stock crashes over 20%
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Yikes. I better spend my reward points soon!
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You have to wonder - and this is far-fetched, too many stars have to align to make this work - if potential investors in GS are being scared off by publishers in an attempt to kill the used game market.
I mean, GS is doing very little to help themselves here as we transition to digital distribution over retail. But still, the used-game thing remains a thorn in publishers' sides.-
That is a very good point. The bread and butter of GME’s sales was used games, and it has been declining for years.
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instead of a vast conspiracy maybe it's just digital sales rendering the used market obsolete
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I'm sure it's the push of digital sales over used that's hurting GS, but do keep in mind how many publishers want to push us consumers towards a cloud-gaming model (which completely strips any issues of game ownership from us for sake of convenience).
(Digital sales for PC and console last year were around $51B, vs $16B for retail https://www.gamesindustry.biz/articles/2018-12-17-gamesindustry-biz-presents-the-year-in-numbers-2018 ) -
I wasn't implying anything other than that.
I have previously recommended buying GameStop's stock, and will likely be updating my rating for the stock when the next Game Trader analyst report comes out. The company has yet to find a replacement CEO, and still finds itself with a ton of secular headwinds. Competition from online and larger retailers combined with digital downloads of video games might be too much for GameStop to handle while pivoting to collectibles and exclusives. There are much larger and better run players in retail, and this board of directors has shown very little to inspire confidence in shareholders. While the stock appears cheap on a number of valuation metrics, it could very well be a value trap if revenues materially decline going forward.
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They tried to switch over to a pop culture toy store but hot topic and similar retailers have that market lock up and the casuals will just get their Funkos at Target.
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Holy crap. That sounds bad. Could they end up going bankrupt soon?
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Manager positions are disposable. Sure you get paid a few cents more but they will burn you out faster than a regular employee.
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I was exaggerating to say the stress isn't worth the higher pay.
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They exemplify everything I hate about retail. Too many retailers are bent on pushing rewards, pre-orders, and credit shit they pressure staff to push with threats of being fired for under performing. It's a huge turnoff and honestly I lay a lot of the decline of retail on those practices. I hate the whole air of desperation that tends to hang over places like that.
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GameStop will be going the way of Blockbuster very soon. There's only so much longer they can ride their out-dated business model. It's as simple as that.
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IS there a business model for a place that sells physical video games?
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Yes. As a small section in a much larger department store.
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They should bring back the Funcoland IP, and open up boutique little sections in those Best Buy like stores like Magnolia or something.
Also, they have some of the smallest footprint retail spaces, so I imagine rent expenditures are actually pretty reasonable for a company their size. -
Yes, departments stores are also doing really well too.
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I didn't say it's a permanent solution. But it would buy them a few years. Walmart isn't going away anytime soon.
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In Japan.
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Whatever it is, it's not "fill your store with toys and shirts instead"
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Yeah, I figured it out but I don't have the time or money to get it started and I for sure as hell don't want to help Gamestop profit from it.
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"GameStop was looking to sell their corporate brand and assets for $3B store credit or $7 cash"
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Can't LOL hard enough
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Or pre-ordering pre-owned copies of Anthem. They're going to have a lot of overstock.
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