GameStop should consider strategic alternatives; stock worth $55 a share upon breakup.

The company is extremely undervalued given investment in new business segments. Breakup value would be worth more than $55. Invite Carl Icahn, Nelson Peltz and Bill Ackman to invest in GameStop.

MIAMI, FLORIDA – 12/29/2016 /EASY NEWSWIRE/ — GameStop should consider strategic alternatives; stock worth $55 a share upon breakup.

  • The company is extremely undervalued given investment in new business segments.
  • Breakup value would be worth more than $55.
  • Invite Carl Icahn, Nelson Peltz and Bill Ackman to invest in GameStop.

Dear Shareholders, Management and Board of Directors of GameStop, Inc.

My name is Derek Capo, founder of eFin and investor of GameStop. I along with other private investment corporations, family members and friends collectively own more than 200,000 shares (mostly via options) which is about .2% of GameStop. I am writing this letter because I strongly believe GameStop is worth more than $55 a share given cash flow of the legacy business as well as growth and higher margins of the new business segments; Technology Brands and Collectibles.  

I first invested in GameStop in 2009 and have researched the company heavily, visiting stores nationwide, listening to every investor call and analyst day ever released. I have also written on Seeking Alpha that the company has been undervalued for years and that Wall Street analysts would never give credit to the superb job the management has done.  It is Wall Street that is causing the depressed stock price as the company has returned more than $2 billion dollars to shareholders via buybacks and dividends yet still the stock is trading at extremely low valuations.

Therefore, I believe it is in the best interest of Shareholders that the company become private OR the company spin-off the Technology Brands and Collectibles unit to increase shareholder value.

GameStop’s management team has made fantastic business decisions since its CEO Paul Raines took over as CEO along with other key executives.  The investments in Spring Mobile and ThinkGeek have produced two new businesses segments that will produce each, at least $1 billion in revenues and more than $100 million in operating profit by 2018, if not 2019.

If these two business segments were to be private or public traded companies, they would be valued at more than two times revenue given its explosive growth and high-profit margins.  For example, companies like BOX, a SAAS cloud business has similar revenue top line growth to the Tech Brand and Collectibles business and losing more than $100 million in cash a year is valued at more than 4x revenues.

GameStop Legacy businesses produced $9 billion in revenues and at .4x Revenue would yield close to a value of $35 a share. 

GameStop Tech Brands generated $850 Million in revenues with operating margins north of 10% and would be valued at $1.5 billion or $14 a share. 

GameStop Collectibles business generated $500 million in revenues with operating margins higher than 10% and growing 30% a year would be worth $1 billion or $10 a share.

Total value of the company net its debt would be worth more than $55 a share vs. its current price of $25.50

I am inviting investors such as Carl Icahn, Nelson Peltz, and Bill Ackman to invest in GameStop to help investors extract significant value from GameStop.

The time is now for the company to consider a going private transaction or a spin-off of the Technology Brands and Collectibles business. Shareholders have had enough of the severe disconnect between what Wall Street believes the company is worth vs. what the company is truly worth.

Sincerely,

Derek Capo
Chief Executive Officer of eFin

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