For years now there have been rumors that GameStop was going to sell the business, or that the company would eventually abandon the brick and mortar retail space in favor of digital distribution. These rumors never quite panned out, but last year it looked like a pretty good indicator that the company was finally going to follow through and sell the business. However, we’re back to the point where the news didn’t pan out and GameStop has announced that it won’t be selling the company. Only this time, it came with a hefty cost.
CNBC is reporting that GameStop’s original plan to sell the business came to a halt when the board members realized that there wouldn’t be enough financing for a prospective buyer, so the sell was scuttled.
The decision to pull out of selling the the company actually caused the company’s stock to plunge by 27.2%, with CNBC reporting a market capital loss of $430 million, with the stock now being valued at $11.28. This is down from the 52 week high of $17.04 from back in September of 2018.
The stock price fluctuated quite a bit throughout the previous year, with December nearly matching the figures in January, dropping all the way down to $11.67 on December 24th during the Christmas holiday.
However, even with the loss in market valuation coming from the abandonment of selling the company, GameStop is still a long ways away from cashing out and calling it quits. In fact, this comes during a time when the company just recently sold its Spring Mobile business for a hefty $735 million in immediate cash proceeds.
The board has yet to decide how it wants to spend that money, but the article notes that the funds could be used to pay down debt, or reinvest in the core business of video games and collectibles. This doesn’t explicitly explain if that means the stocking of more/different video games or publishing video games and collectibles, the latter of which could prove to be very profitable if handled properly.
So, where did all the talk of selling the business even come from?
Well, in a letter from the board to the shareholders, it was mentioned that a discussion of selling the company came about during June of 2018, where the option was placed on the table. However, this was all just based on potentialities and there was nothing set in stone at the time nor thereafter.
In looking over the options, the board concluded that selling GameStop just wasn’t in the cards at the moment, and after acquiring three-quarters of a billion dollars in the Spring Mobile sale, it just didn’t seem prudent to sell the business at this time.
What does this mean for the future of GameStop? Will the company keep selling used games at marked up prices? Probably. Will the company keep selling brand new games at the suggested retail price, including hotly anticipated titles like Anthem and Far Cry: New Dawn? Probably. Will collectible Amiibos and hardware accessories for the major gaming platforms still be available? Probably. So, what exactly will change on the consumer end? Well, not much… for now. It’s basically going to be business as usual just until the board of directors assigns a new permanent CEO and choose a proper direction for the brick and mortar retailer.
