It’s no secret that GameStop shares have gone vertical, up more than ten fold this year. Besides making millionaires of a lot of Redditors, this also lets GameStop sell more shares at high prices, enabling them to raise capital with ease.
And raise they did, to the tune of $550 million in April. They recently used that money to completely pay off their long term debt:
The company said it completed its voluntary early redemption of $216.4 million of its 10.0% senior notes due 2023. The voluntary redemption covered all of the outstanding 10.0% notes, which represented all of its long-term debt.
At 10%, this debt was costing GameStop over $20 million a year. Getting rid of it should give them more room to fund their planned transformation into an e-commerce business, which is being led by Chewy co-founder and soon-to-be GameStop board chairman Ryan Cohen. On the other hand, this share raise dilutes existing GameStop shareholders, making their stake worth less.
GameStop still has $146 million in short term debt and a revolving line of credit, per their most recent annual report, but that is likely under lower interest rates than those long term bonds. I wouldn’t be surprised to see the short term debt paid off early as well.
In all, GameStop seems to be seizing the opportunity to use its high stock price to fund its transformation. Whether they can actually pull that transformation off remains to be seen.
Dig into these posts for more on GameStop:
- Departing GameStop CEO Gets $179 Million Payout
- Hedge Fund Loses Half Its Value on GameStop Trades
- GameStop Sales Down 40% in 2 Years
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