GameStop Calls Off Company Sale, Stock Plummets

Shares of GameStop were down more than 23% in early trading Jan. 29 after the company announced it was canceling efforts to sell the world’s largest video game retailer.

The Grapevine, Texas company, which operates more than 5,800 retail locations in 14 countries, said is continuing the search process to appoint a permanent CEO and is working with an executive search firm.

In June 2018, GameStop’s board began discussions with third parties regarding a potential sale of the company. The board terminated sale efforts due to the lack of available financing on terms that would be commercially acceptable to a prospective acquirer.

GameStop earlier this year sold its Spring Mobile business generating about $735 million in cash. It plans to use the funds pay down outstanding debt, fund share repurchases, and reinvest in core video game and collectibles businesses.

As of Nov. 3, 2018, GameStop had $820 million of outstanding debt, $350 million of which carries a 5.50% interest rate and is due on Oct. 1, 2019. The elimination of that debt will represent annualized savings of roughly 14 cents per share, according to Wedbush Securities digital media analyst Michael Pachter.

“GameStop should be a primary beneficiary from the console refresh in 2020 or 2021, and it remains the dominant force in the video game industry’s pre-owned segment,” Pachter wrote in a Jan. 29 note.

Earlier this month, GameStop reported a 5% decline in global 2018 winter holiday revenue to $2.63 billion, compared to the nine-week holiday period ended Dec. 30, 2017.

 

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