Why GameStop Stock Surged Today

What happened

Shares of GameStop (NYSE: GME) have surged today, up 12.7% as of 12:32 p.m. EDT, following reports that the company had retained a financial advisor to explore a possible sale. The video game retailer has reportedly tapped Perella Weinberg Partners to assist in the process.

So what

GameStop is currently conducting an official auction to sell the company and potentially go private, according to DealReporter (via Bloomberg). Private equity firms Apollo Global Management and Sycamore Partners are said to be the top suitors that may acquire the retailer. Speculation had been mounting in recent months that GameStop could be acquired, and the company confirmed in June that it was “in exploratory discussions with third parties regarding a potential transaction.”

Image source: Getty Images.

Recent doubts about a potential sale weighed on shares just last week, so investors are cheering that a deal may still take place.

Now what

GameStop has struggled to remain relevant in recent years, both because e-commerce rivals continue to cut into retail sales and gamers are increasingly purchasing games digitally for download, saving them a trip to a physical store. The stock has trended steadily lower over the past five years. GameStop expects full-year 2018 sales to fall 2% to 6%, with comparable-store sales forecast to be flat to down 5%.

The company reports earnings tomorrow. Here’s what to look for.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of GameStop and has the following options: short October 2018 $15 calls on GameStop. The Motley Fool has a disclosure policy.

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