We’ve all been watching GameStop lately with their news of a possible buyout to a couple of potential buyers (Sycamore Partners and Apollo Global Management). There was going to be an official announcement by the end of next month on whether they were going to sell or not; the announcement came sooner than expected causing their stocks to take a hit, losing about $400 million in market capitalization.
GameStop decided to not sell with the board saying that “there wasn’t enough available financing on terms that would be acceptable to a perspective buyer.” GameStop has been in rocky water for a while now, with talks of a buyout happening a couple of years ago as well, but never happening. You can read the full statement below:
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.
What does this mean for the future of GameStop? Only time will tell. Hardware sales did well, with the release of Marvel’s Spider-Man and Red Dead Redemption 2 hitting record sales numbers. These types of blockbuster games do not release every year though, so GameStop does not need to rely on this happening each year, or every other year for that matter, to help them limp through their fiscal year(s) between these kinds of game releases.