GameStop shares are surging again today, even as the company is losing hundreds of millions of dollars a year.

The stock is reacting to Chewy founder Ryan Cohen beginning a push to transform GameStop into an e-commerce business. But it still has 5,000 stores that were losing a fortune even before COVID. And they won’t be easy to get rid of.

Commercial leases typically last for several years, unlike residential ones. But what exact terms is GameStop bound by? This morning, I made it my mission to find out.

The most recent info I could find was from their 2018 annual report:

Store leases typically provide for a lease term of one to five years, plus renewal options

That means this store-centric business model that is losing a fortune is locked in for years. Whatever Mr. Cohen does, it won’t take effect for quite some time, and the company could be out of cash by the time it happens.

GameStop lost $300 million in the first 9 months of 2020 and had only $600 million in cash left. They could be out of money 18 months hence at that rate, or about 1 year from now. That’s long before these money-losing leases expire and free them to pursue a better business model.

Their best course of action is to take advantage of their high-flying stock and issue a lot more shares. That war chest should be used to wind down all physical stores and completely focus on their e-commerce business, which is actually growing very quickly.

Such a plan would dilute existing shareholders significantly though, so for current GameStop shareholders, it’s hard to see a happy ending to this story.

For more on GameStop, check out these posts:

• GameStop Is Surging, But Are They Willing To Make Hard Changes?
• There Could Be Another GameStop Short Squeeze, But Beware Weak Fundamentals
• 28% Of Americans Bought Meme Stocks in January

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Photo: “GameStop” by JeepersMedia is licensed under CC BY 2.0