With the increasing popularity of digital games and online retailers, such as Steam and Amazon, many video game retailers, such as GameStop, have started experiencing a drastic decline in video game sales over the last year. In 2017, GameStop closed down over 150 stores across the United States, and now GameStop seems to be holding talks with private equity firms about a potential buyout transaction after receiving interest in its share price very recently.
Over the past few years, and especially during last year, GameStop's stock has gradually gone down more than 32 percent, which brought its market capitalization from about $9.4 billion in 2007 to $1.42 billion in 2018. On Monday though, GameStop shares went up almost 13 percent to $15.78, which indicates a possible buyout of the company, as a buyout will allow investors to cash out their holdings. GameStop has also recently hired a financial adviser, who may possibly be assisting in buyout negotiations, after its former CEO, Michael Mauler resigned for “personal reasons” in May.
Sycamore Partners is one of the private equity firms that has expressed interest in GameStop, but there is no concrete evidence or confirmation from GameStop or Sycamore that it will be buying the video game sales franchise. The future sure looks uncertain for GameStop at the moment, and a buyout could save the company from its gradual decline. It will also mean that radical restructuring of the company’s operations may take place, such as layoffs or the liquidating of assets or staff, to help pay back the new creditors.
GameStop has been trying out various strategies in the past year in order to make up for the lack of physical video game sales, such as the introduction of a game rental program. With the advent of services such as Xbox Game Pass, which is essentially a digital video game renting service, GameStop has continued to struggle. We certainly hope that this long-standing video game sales company that has equipped gamers for years can make it through this uncertain period of time.