GameStop shares tumble after CEO says store network will shrink

FILE PHOTO: Traders work at the post where GameStop is traded on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 12, 2024. REUTERS/Brendan McDermid/File Photo

(Reuters) - Shares of GameStop tumbled on Monday after CEO Ryan Cohen told investors that the videogame retailer plans to operate a smaller network of stores, but did not provide details on what it intends to do with its cash pile.

GameStop shares were down 11.6% at $25.38 on Monday afternoon after the annual general shareholder meeting, which lasted about 20 minutes.

Cohen said he anticipates the business will be operated with “a smaller network and more value-added" items as part of the company's attempt to boost sales and profitability.

He did not reveal how the company will use its roughly $4 billion in cash, which it built up following share sales in June and May, saying only that having a stronger balance sheet is "always an advantage."

Shares of the video game retailer have gyrated wildly over the last month since Keith Gill, the stock influencer known as Roaring Kitty who helped kick off meme-stock mania in 2021, reappeared and later disclosed a large position in GameStop.

Investors had been hoping that Cohen would reveal more details of a strategic plan to revitalize GameStop's business, analysts said.

Cohen's lack of detail on acquisition plans "is disappointing for at least some investors," said Michael Pachter, an analyst at Wedbush Securities with a price target of $13.50 on the company.

Pachter noted that GameStop’s recently released filings showed a profit margin of about 36%, suggesting the company is doing well in reselling used software and hardware. On the other hand, competition remains intense in the market for gaming consoles while the second-hand market for used software is slowly drying up as gamers shift to digital downloads, he said.

The company has been grappling with slowing sales as its core business of selling new and pre-owned videogame discs takes a hit from consumers' move to downloading games digitally or streaming. Net sales fell to $881.8 million compared with $1.24 billion a year ago, the company said on June 7, when it reported earnings earlier than expected.

GameStop raised $933 million by selling shares to cash in on a meme stock rally last month, when the stock doubled in value, and raised an additional $2.14 billion earlier this month. Still, shares are down sharply from their May peak and down more than 70% from 2021 intraday highs.

Gill triggered the most recent wave of exuberance among retail investors after he disclosed ownership of 5 million GameStop shares and 120,000 June $20 strike call options in a screen shot posted on Reddit on June 2.

Gill updated his position last week to show he owned about 9 million shares and no options on the company.

(Reporting by Suzanne McGee in Providence, Rhode Island, and Priyanka G in Bengaluru; Additional reporting by Saqib Iqbal Ahmed; editing by Ira Iosebashvili, Megan Davies, Dave Gregorio and Matthew Lewis)

Follow us on our official WhatsApp channel for breaking news alerts and key updates!


Next In Tech News

Nigerian judge adjourns Binance money laundering trial to October
New Ray-Ban Meta glasses have outsold previous version, Essilux CEO says
India's Ola Electric likely to set valuation at around $4.5 billion for IPO, sources says
Exclusive-FTC seeking details on Amazon deal with AI startup Adept, source says
SymphonyAI targets second half 2025 IPO with $500 million in revenue run rate
Microsoft's hiring of former Inflection AI staff prompts UK probe
Former Yandex chief Volozh returns with AI infrastructure venture after Russia split
Amazon Prime Day is a big event for scammers, experts warn
Russian tech firm Yandex's ex-international businesses launch as Nebius Group
Self-proclaimed bitcoin inventor faces UK criminal probe for alleged perjury

Others Also Read