GameStop is no longer trying to sell the company due to a “lack of available financing on terms that would be commercially acceptable to a prospective acquirer,” it announced Tuesday.
The company didn’t lay out what that meant in terms of the future for the company.
What that means, according to Wedbush Securities analyst Michael Pachter, is that while GameStop may have been able to find investors, they weren’t able to find any lenders who thought that company was a good investment.
“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.”
Pachter added that he doesn’t believe those future game-streaming services are intended to replace game consoles, but rather to supplement them.
“But try to explain that to a lender,” he told Variety.
In June 2018, GameStop’s Board and outside financial and legal advisors started 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.
“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.”