GameStop Bowing ‘Modified Dutch Auction’ to Buttress Stock

With its stock in decline, GameStop, the world’s largest video game retailer, June 10 disclosed plans to buttress shares through a so-called “modified Dutch auction.”

Such a strategy enables a company to repurchase shares within a select price range in a short period of time. A typical share buyback program on the open market can take longer and is subject to not receiving the lowest price for investor shares.

GameStop, which saw shares plummet more than 35% on June 7 following lackluster financial results, wants to purchase up to 12,000,000 shares of its Class A common stock at a cash price of not greater than $6.00 and not less than $5.20 per share.

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On June 7, 2019, the closing price of common stock was $5.02 per share. The tender offer is expected to commence June 11 and to expire at 5:00 p.m., New York City time on July 10.

The offer is being made under GameStop’s $300 million share repurchase program announced on April 2.

“While improving our operations and capturing efficiencies in our business to drive returns for our shareholders continues to be the top priority for the new leadership team, we view the purchase of our shares to be financially compelling at this time,” CEO George Sherman said in a statement. “We are committed to leveraging the core strengths of our business, implementing longer-term growth initiatives and continuing our disciplined approach to capital allocation.”