GameStop, only having just confirmed their “exploratory discussions with third parties regarding a potential transaction,” announced via press release on January 29th that they have “concluded its previously announced efforts […]
GameStop, only having just confirmed their “exploratory discussions with third parties regarding a potential transaction,” announced via press release on January 29th that they have “concluded its previously announced efforts to pursue a sale of the company.” Immediately following the announcement, GameStop stock prices fell a staggering 27% from $15.49 a share, to a record low of $11.16 (as of the time of this article’s publication).
GameStop’s search for a potential buyer likely came as no surprise to their investors and consumers. Rumors of the company’s search for a buyer had already been circulating, as GameStop had already announced plans of seeking ways to review strategic alternatives to increase profits and market share, according to the Wall Street Journal.
In an attempt to appease board members and shareholders, GameStop already sold its Spring Mobile business in January 2019 for a total of $735 million. However, GameStop has not yet determined the best course of action for using the cash generated by the sale. In a press release, they explained they were considering the following strategies: “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.”
So, how does GameStop’s future look? Honestly, not great. Despite their sale of Spring Mobile, GameStop still posted a $488.6 million third quarter loss. Furthermore, even before this drop in share value and their failure to obtain a buyer, experts were already claiming that GameStop lacked “investor credibility” and that “there are no signs of a turnaround” for the beloved (or loathed?) gaming retailer. It’s predicted that as a result of this snafu, GameStop will likely rapidly close many of their retail locations.
With the onset of digital downloads, and online game streaming services becoming more and more mainstream, is there still a place and need in the world for a dedicated brick and mortar video game store like GameStop? How do you feel about GameStop’s future? Will they be able to pull out of this slump, or will they be the next in a long chain retailers to close their doors for good? Let us know what you think in the comments below.
By: Bree Mimms [1/31/19]