GameStop, the video game retailer, saw its shares drop by 11.6% to $25.38 after CEO Ryan Cohen disclosed plans for a reduced store network during the company’s annual general shareholder meeting. The meeting, which lasted approximately 20 minutes, left investors concerned due to the lack of specific details regarding the company’s substantial cash reserves.
Cohen indicated that GameStop aims to operate with fewer stores, focusing instead on offering more value-added items to enhance sales and profitability. However, he did not elaborate on how the company intends to utilize its approximately $4 billion cash pile, accumulated from recent share sales in May and June. He emphasized the strategic advantage of maintaining a robust balance sheet without specifying future investments or acquisitions.
Analysts and investors had anticipated a more comprehensive strategic plan from Cohen to rejuvenate GameStop’s business model. Michael Pachter from Wedbush Securities expressed disappointment over the lack of clarity regarding potential acquisitions, noting that investors were eager for concrete details.
Despite challenges in the gaming console market and a decline in the second-hand software segment due to digital downloads, GameStop reported a profit margin of around 36% in recent filings, buoyed by strong performance in reselling used software and hardware.
GameStop’s stock has experienced significant volatility, influenced recently by Keith Gill’s disclosure of a large ownership stake in the company. Gill, known as Roaring Kitty, sparked renewed interest among retail investors, contributing to fluctuations in GameStop’s share price.
The company raised substantial capital through share sales amid the meme stock rally, yet its shares remain significantly below their May peak and well below 2021 highs, reflecting ongoing market challenges and investor sentiment.