GameStop has announced this morning that they will no longer pursue suitor to buy out the company. Despite their most recent Chairman Executive Officer (CEO) stepping down from his position after only few months, as well as the company looking for buyout as early as Spring of last year, it appears that they will no longer go forward with this venture and instead will continue the search for a new CEO. This announcement sent ripples through the gaming and business world, and it had a major impact on the stock market. Unfortunately, it seems to have been a severely negative one, as GameStop’s stock dropped approximately 25% following the announcement.
The Board of Directors made their decision “due to the lack of available financing on terms that would be commercially acceptable to a prospective acquirer.” What this essentially means is that the company is not financially set to come to an agreement on a proposed buyout for a potential suitor. In addition, the company also reiterated that the sale of their Spring Mobile business was completed on January 16 for $735 million for immediate cash proceeds. In regards to this, the company stated “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.”
Despite still being the largest independent video game retailer, GameStop has been struggling to maintain a capital presence due to the rapid decline of the brick and mortar and the rise of online shopping. The company has tried to prevent this by expanding their online options, including making retro games and systems available again. These changes made little difference as they continued to lose more money, which led to the company seeking potential suitors last year.
With online retailers such as Amazon and Ebay, as well as digital retailers like Steam, GOG, and the Epic Games Store dominating the market, GameStop might find themselves in a no-win situation sooner than later. The competition is ever changing, and it’s a relentless beast that never stops. They’ve been able to stay afloat all this time, but with the decision to stay independent now official, they will most likely have to do something extraordinary to survive. Hopefully the recent sale of their Spring Mobile division helps them out in the long run.