GameStop preliminary Q2 results detail eBay investment
GameStop is expecting an increase in its second-quarter profit due to its investment gains from stake in eBay, but sales are expected to decrease.
In preliminary results for its second quarter (ended Aug. 2), GameStop said its net sales are expected to be in the range of $780 million to $800 million, down from $972.2 million in the year-ago quarter. The decrease primarily reflects the prior-year launch of Nintendo Switch 2, planned store closures and the divestiture of the company's operations in France, the company said.
Net income is expected to be in the range of $290 million to $310 million, compared to net income of $168.6 million in the prior year’s second quarter. Operating income is expected to be in the range of $150 million to $170 million, compared to $66.4 million.
The retailer said its net income for the quarter reflects approximately $238 million in net gains from its eBay derivative asset and equity investment, with that figure partially reduced by around $75 million in losses on digital assets and related receivables.
In May, GameStop made an unexpected attempt to acquire eBay Inc., submitting an unsolicited, non-binding proposal to acquire 100% of the company at $125 per share in 50% cash and 50% stock. The offer was rejected by eBay.
During the quarter, GameStop converted its previously disclosed derivative position related to eBay Inc. into a direct equity investment, resulting in a decrease in cash, cash equivalents, and marketable securities. The company's net income for the quarter includes approximately $238 million of net gains related to its eBay derivative asset and equity investment, partially offset by a loss of approximately $75 million on digital assets and related receivables.
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As of Aug. 1, GameStop held approximately 43.4 million shares of eBay common stock with a fair value of approximately $4.947 billion
The company also announced Monday that it is amending a previously disclosed plan to exchange approximately $1.4 billion in convertible notes for Class A common stock.
Under the revised terms, noteholders will receive roughly 55.5 million shares of common stock — about 73% of the consideration — and approximately $358.4 million in cash, or about 27%, which GameStop said it expects to fund from cash on hand. The exchange is now expected to close on or about Sept. 3.
