GameStop Corp (NYSE:GME) stock has performed poorly since the beginning of the year and has lost approximately 60%. However, on Monday the stock was up 7% by midday to $5.38 after the videogame retailer announced a modified Dutch auction tender offer for 12 million shares of the company’s stock.
12 million buyback plan
The company has agreed to pay investors not more than $6 and not less than $5.20 per share to the lowest price that will arrive at 12 million. Investors will indicate how many shares they want to part with and what price range, but in the end, they will all get the same price per share. Currently, GameStop has approximately 102 million outstanding shares.
George Sherman, the new CEO of GameStop, stated that while the company’s priority is improving its operations and picking up efficiencies in its business to drive growth for shareholders, it nonetheless vies the buyback shares to be something compelling financially. Sherman took over from Shane Kim who had been serving in an acting capacity since May last year. Shane took the role of interim CEO following the resignation of Michael Mauler.
Buyback part of a $300 million buyback plan
This offers part of the company’s $300 million buyback plan that was initially announced at the beginning of this year. If the 12 million shares get tendered at $6, then GameStop will be on the hook for around $72 million. On May 4 the company reported that it has more than $0.5 billion in cash and cash equivalents.
The company has been struggling recently as online platforms such as Amazon have taken offer digital game sales considering its competitive pricing as well as direct shipment. The company has embarked on a cost-saving and profit enhancement program that will strengthen the company as well as support future enhanced financial performance as well as profitability.
Rob Lloyd the COO said that going forward the company is prepared to face the challenges facing their pre-owned videogame businesses as they continue to evolve their business model.
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