Written by Susan McGee and Priyanka J
(Reuters) – GameStop (NYSE:) shares fell on Monday after CEO Ryan Cohen told investors that the video game retailer plans to operate a smaller network of stores, but did not provide details about what it intends to do with its pile of cash.
GameStop shares fell 11.6% to $25.38 on Monday afternoon after the annual general shareholder meeting, which lasted about 20 minutes.
Cohen said he expects the company to be operated with a “smaller network and greater value-added elements” as part of the company's attempt to boost sales and profitability.
He did not reveal how the company would use the nearly $4 billion in cash it raised after stock sales in June and May, saying only that having a stronger balance sheet is “always an advantage.”
Shares of the video game retailer have moved significantly over the past month since Keith Gill, the stock influencer known as Roaring Kitty who helped launch 2021's stock mania, later revealed a large position in GameStop.
Analysts said investors were hoping Cohen would reveal more details about a strategic plan to revitalize GameStop's business.
Cohen's lack of details about the acquisition plans is “disappointing for at least some investors,” said Wedbush Securities analyst Michael Pachter, who has a $13.50 price target for the company.
Butcher noted that GameStop's recently released filings showed a profit margin of about 36%, suggesting the company is doing well at reselling used software and hardware. On the other hand, competition in the gaming console market remains intense, while the used software market is slowly drying up as gamers turn to digital downloading.
The company is facing a sales slowdown as its core business of selling new and used video game discs is affected by consumers' shift to digital downloading or streaming of games. The company said on June 7, when it announced its earnings earlier than expected, that net sales fell to $881.8 million compared to $1.24 billion a year earlier.
GameStop raised $933 million by selling shares to capitalize on a stock rally last month, when the stock more than doubled in value, and raised an additional $2.14 billion earlier this month. However, shares have fallen sharply from their peak in May, and are down more than 70% from their 2021 intraday highs.
Gill recently sparked a wave of enthusiasm among retail investors after he revealed ownership of 5 million shares of GameStop stock and $120,000 worth of June 20 strike call options in a screenshot posted to Reddit on June 2.
Gill updated his position last week to show that he owns about 9 million shares and no options in the company.
