GameStop (GME) has come under pressure as mega-retailers such as Best Buy (BBY) have entered the used-game business. However, shares are up ~7% this morning as management continues to buy back shares in an effort to keep the battered stock afloat.
According to top video game analyst Michael Pachter at Wedbush Morgan:
- $300 million of the additional repurchase funds will be used to repurchase shares, and $200 million will be used to retire a portion of the company’s Senior Notes.
- The new authorization is in addition to the $300 million share repurchase plan announced in January 2010 and completed in Q2:10.
- As of the end of Q2:10, the company had 154.154 million diluted shares outstanding, as well as $447.798 million of Senior Notes payable outstanding which carry an 8.0% annual interest rate and are due to mature on October 1, 2012.
One has to wonder why management isn’t using cash to find new revenue streams as competitors have swam the moat and scaled the wall:
Disclosure: No position in shares mentioned.