It has been announced that video game retailer Gamestop has officially abandoned its buyout efforts.
The announcement comes as a result of the company being unable to acquire a potential buyer on favorable terms with shares falling down 21% in early trading as a result.
The company stated that they had held discussions with numerous firms such as Hot Topic owner Sycamore Partners, but could not reach an amicable agreement regarding financing that would be “commercially acceptable to any prospective buyer.”
What this could mean for the future of Gamestop as more brick-and-mortar stores face fierce competition from digital retailers like Amazon and digital gaming retailers is uncertain. According to Wedbush Securities analyst Michael Pachter explained that physical media may be the only thing that is protecting the company from completely plummeting, but there is a way that it could suffer in the future.
“A new console without a disc drive — unlikely, but possible — could kill their business,” Pachter explained. “And all this talk of Amazon, Apple, and Google streaming (video games) causes some to question whether there will be consoles at all.” stated Pachter.
Pachter added that the development of game streaming services won’t have an impact on console gaming, but rather supplement them. This is not something that Pachter has said cannot be easily explained to any prospective lender.
In the summer of last year, Gamestop’s Board and outside financial and legal advisors had commissioned a review of a “wide range of alternatives to enhance shareholder value,” the company said in Tuesday’s announcement.
“The Board undertook a comprehensive review process, including discussions with third parties regarding a potential sale of the company,” it wrote.
As part of that process, the company sold its Spring Mobile business. The sale, which was completed on Jan. 16 brought in about $735 million in immediate cash proceeds for the financially struggling retailer.
“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,” according to the statement. “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 do you think of this news? Do you think Gamestop will last much longer? Let us know in the comments below and join the conversation with me on Twitter at @ANerdWonder on Twitter!