Game Over For GameStop's Sales Process, Shares Tumble 20%

Video game and consumer electronics retailer GameStop Corp. GME said Tuesday it's no longer pursuing a sale of itself.

What Happened

Reuters reported last June GameStop was pursuing a sale of itself with private equity firms but after months of discussions and consultations with advisers it has now "terminated efforts to pursue a sale." The company cited a "lack of available financing on terms that would be commercially acceptable to a prospective buyer."

Shares of GameStop tumbled 22 percent to $12.29 Tuesday morning in reaction to the announcement.

Why It's Important

GameStop is the largest specialty retailer of video games in the U.S., but continues to struggle against online e-commerce companies like Amazon.com, Inc. AMZN, Variety reported. In fact, Amazon offers video gamers more competitive pricing and the ability to ship directly to consumers.

What's Next

GameStop's management and board of directors are now in the process of evaluating how to best use the $735 million in cash proceeds it gained from divesting its Spring Mobile business. Some of the options available include paying down debt, financing a future stock buyback program, reinvesting cash into the core video game business and collectibles business.

The board of directors is also in the process of searching for a "high qualified, permanent" CEO.

Related Links:

Pachter: Video Game Stocks Are 'Relatively Recession-Proof'

Sell-Side: GameStop Faces Increased Threat From Digital Mix Shift

Photo credit: BentleyMall (Own work), via Wikimedia Commons

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: NewsLegalM&ATop StoriesMoversTrading Ideasretailersvideo games
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!