I am always interested in mergers, acqui-hires and divestments. This column is an infrequent series of analytics posts aimed at hypothetical scenarios and fictional scenarios.

In today’s episode and the Kickstarter of the series, I take a look at two companies with pretty obvious synergies.

The origin of this post comes from Newegg’s recent Nasdaq notification regarding its minimum bid requirement.
I was then additionally surprised when the GameStop Stock saw a Nice 10% rise in its value and Roaring Kitty returned to Twitter… Then it ticked, why don’t these companies merge?

Who are Newegg?

Newegg Commerce, Inc. (NASDAQ: NEGG) is a City of Industry, California-based global online retailer founded in 2001 that focuses on PC Hardware, consumer electronics, gaming peripherals, home appliances, automotive and lifestyle technology.

Like all stock markets, the Nasdaq has compliance requirements and Newegg after reaching a share value of $0.83 per share.

That is a market capitalisation of 315.82 million USD with a value of $0.83 (-0.047/5.39) per share at closing on 10 May, 4 pm GMT-4.

Newegg has 180 calendar days or until November 4, 2024, to regain compliance. In other words, the stock risks being removed from the NASDAQ if it does not at least trade” at least $1.00 for a minimum of ten consecutive business days”.

Leadership: Newegg was founded by Taiwanese-born American entrepreneur, Fred chang who is still a member of the board. The Newegg board is chaired by Zhitao “Tom” He who is also a board member of a few Chinese companies. Anthony Chow is the Global Chief Executive Officer of Newegg.

In 2023 alone the website had over 2.5 million active customers, 4.8 million reviews and over 6.2 million plus SKUs.

Newegg composes of Newegg, Newegg Business, Newegg Canada and Newegg Global.

The company made a Gross Profit between $160.0 million and $165.0 million for 2023.

Product categories: system & components, electronics for automotive, gaming, networking and smart home, software.

Who is GameSpot?

GameStop Corp (NYSE: GME) is a physical retail and online e-commerce platform which focuses on gaming.

The company was founded in Dallas in 1984 as Babbage’s and took on its current name in 1999.

It is a specialist retailer of games and entertainment products through stores and e-commerce platforms.

It has a total market capitalisation of 5.35 billion USD at a value of $17.46 (-0.55) per share at closing on 10 May, 7:59 pm GMT-4.

Founding: GameStop was founded by James McCurry and Gary M. Kusin in 1984 in Dallas Texas as a software retailer. James and Gary were former Harvard Business School classmates. Babbage’s was then merged with Software Etc. to form NeoStar Retail Group in 1994. In 1996 it filed for Chapter 11 bankruptcy after which the assets were acquired by Lenard Riggio for $58.5 million who was also a large shareholder of Barnes & Nobel. Its holding company was then known as Babbage’s Etc. It then launched the GameStop brand in 1999 within 30 stores in strip malls. It all launched GameStop.com as a website that allowed customers to purchase video games online which was promoted across the Babbage’s and Software Etc. stores. The holding company was purchased by Barnes & Noble Booksellers in 1999 for $215 million. A month later, the acquisition of Funco, an American video game retailer was acquired for $160 million. Babbabages Etc was then transferred to Funco. Barnes & Noble then acquired Game Informer after which in December 2000, it renamed Funco to GameStop, Inc. for its IPO. The company IPO-ed in February 2002 with Barnes & Noble controlling 67% and 95% of voting shares. Barnes & Noble then spun out 59% shares in October 2004 to shareholders of Barnes & Noble which made the company independent.

From there the company then acquired the:

• 2005 > EB Games (formerly Electronics Boutique) for $1.44 Billion.
• 2007 > Rhino video Games from Blockbuster for an undisclosed amount.
• 2008 > Free Record Shop’s 49 Norwegian stores.
• 2008 > French video-game retailer known as Micromania.
• 2009 > a major stake in Irish browser game studio, Jolt Online Gaming which closed in 2012
• 2010 > San Francisco-based website for browser-based games, Kongregate which it then sold for $55 million in 2017.
• 2011 > video game tech developer, Spawn Labs and Impulse (digital distribution and multiplayer video game platform formerly owned by Stardock). It shut down PC Downloads and Spawn labs in 2014.
• 2012 > Denver-based online marketplace for consumer electronics, BuyMyTronics
• 2012 > 49.9% ownership of Simply Mac, a Salt Lake City-based Apple authorised reseller and repairer founded in 2006. Up its stake to 50.1% in 2013. Close a few locations in 2017 and then divested it in 2019.
• 2013 > Spring Mobile, a Salt Lake City-based retailer for AT&T branded wireless services.
• 2015 > 163 RadioShack locations
• 2015 > Geeknet
• 2016 > 507 AT&T store chains with plans to divest into a new business with less dependency on the video games market

Leadership:

Geographic breakdown: GameStop primarily operates geographic segments in the United States, Australia (including Zealand ), Canada and Europe.

Retail Footprint: As of February 3, 2024 it has 4,169 stores; 2,915 in the US (Texas having over 398 stores), 203 in Canada, 404 in Australia and 467 in Europe (France having over 314 stores). The Stores are not all branded GameStop but include EB Games and Micromania.

There is even an Australian and European segment which includes 49 pop culture-themed stores that sell collectables, apparel, gadgets, electronics, toys and other retail products for technology enthusiasts which operate under the Zing Pop Culture brand.

The company even owns Game Informer Magazine, a print and digital gaming publication.

The company has over 8,000 full-time salaried employees and 18,000 part-time hourly associates worldwide. Much like its sales, the hourly associates can fluctuate with its business seasonality.

Competitors:

• US Competition > Walmart Stores Inc., Target Corporation, Best Buy Co. Inc and Amazon.com Inc.
• Europe > consumer electronic retailers FNAC-Darty and Media Market-Saturn. Major hypermarket chains such as Carrefour and Auchan, and online retailer Amazon.com.
• Canada > Walmart and Best Buy.
• Australia > JB HiFi stores, Big W, Target and Amazon.com
• Globally > Sony, Nintendo and Microsoft for direct-to-consumer offerings.

Points for Merger

• shared markets
• combine market capitalisation of 5.7 Billion
• combine revenue of $6.383 Billion (456.14 Million for Newegg & $5.927 Billion for GameStop) for 2023
• distribution, marketing, technological and logistic synergies and cost savings.
• overlapping product segments such as Gaming and hardware.
• Overlapping suppliers and distribution partners
• share expertise across the Board and Shareholders

Final Verdict: GameStop should acquire Newegg.

Featured image courtesy of Flickr’s Will Buckner – The GameStop logo atop their retail store location in Vallejo, California. 

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