GameStop drops more than 12%, hits session lows after annual meeting fails to offer details on firm's strategy
Traders work at the post where GameStop is traded on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 12, 2024. Brendan McDermid | Reuters
GameStop shares dropped to session lows Monday after its highly anticipated annual meeting failed to offer any concrete updates on the video game retailer's future plans.
The meme stock was down more than 12%, as the company's rescheduled shareholder event wrapped up with no detailed remarks about the company's strategies. No shareholders got to ask their questions during the meeting which lasted about 30 minutes. Shares were down as much as 17% at $23.79.
In brief introductory remarks, CEO Ryan Cohen reiterated the company's plans to focus on cutting costs and boosting profits and intimated that more store closures could be on the horizon.
"Revenues without profits and prospects of future cash flows are of no value to shareholders. This means a smaller network of stores with an expanded assortment of higher value items that fit into our trade-in model," said Cohen.
Cohen didn't provide more specifics on the company's future growth strategies. He spoke about the importance of having a "strong balance sheet" and called it a "strategic advantage" — especially in times of economic uncertainty. As of May 4, GameStop had about $1 billion in cash and cash equivalents on its balance sheet.
"While the future is always uncertain, the last decade's monetary and fiscal policies both within the US and globally are historic anomalies. Exiting from an ultra-low interest rate environment is likely to have unforeseen reverberating effects across the economy, as seen with inflation hitting 40 year highs in 2022," said Cohen.
"Under the current interest rates, an investment made in today's economic climate must bear a higher return threshold," he added. "As my father always said, actions speak louder than words, we are focused on building shareholder value over the long term. We are not here to make promises or hype things up, we're here to work."
The event was disrupted by computer problems and postponed on Thursday as servers crashed under overwhelming interest in the stream.
GameStop came into the limelight again as Reddit ringleader Roaring Kitty, whose legal name is Keith Gill, stirred up another trading frenzy. Gill gained notoriety in the online trading realm for touting his large positions in GameStop, both in common shares and risky options. His position has topped 9 million shares in GameStop after exiting a gigantic call option position before expiration.
The stock has gained seven out of the past eight weeks after more than doubling in May. Year to date, it's up about 45%.
GameStop is still struggling with a transition to online gaming away from brick-and-mortar video game purchases, with investors banking on Cohen to eventually reinvent the company.
The retailer recently raised more than $2 billion in a recent at-the-market equity sale as the video game company took advantage of the revived meme rally. GameStop said it intends to use the money for general corporate purposes, which may include acquisitions and investments.