GameStop Stock Takes a Tumble on No-Deal Fears

Video game retailer GameStop Corp. on Aug. 27 suffered its worst stock decline since May as investors questioned whether the Grapevine, Texas-based company will succeed in a deal to be acquired, according to Bloomberg..

The shares fell nearly 11% to close at $14.71, the biggest same-day fall since May 18, Bloomberg says.

GameStop had rallied in recent months, buoyed by speculation that it was in negotiations to be acquired by a private equity firm such as Sycamore Partners. The company on June 19 said it was in “exploratory discussions” with third parties about a potential deal, Bloomberg said, but warned at the time that those talks would wind up a dead end.

“It’s been a roller-coaster ride,” said Matthew Kanterman, an analyst at Bloomberg Intelligence. “They’ve been approached with a proposal to go private – people are waiting for something about that.”

Seeking Alpha on Aug. 27 observed, “GameStop is a troubled company, with a high dividend yield above 9%. Investors’ sentiment is very negative, due to the continued decline in brick-and-mortar retail industry, particularly when it comes to video games. However, GameStop is highly profitable, and the company still generates enough cash flow to sustain its dividend.”

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