City wary as Game plans float after comeback from the dead
Monday 19 May 2014
Game Digital’s plans for a £400m flotation, just two years after the computer games retailer fell into administration, was met with scepticism by the City yesterday.
Previously known as Game Retail, the company, which has 560 stores across the UK and Spain, yesterday revealed its intention to list on the London Stock Exchange within the next month to help clear debts of more than £120m.
Game collapsed in 2012 after dire trading and crippling costs led to suppliers pulling their backing. But the chief executive, Martyn Gibbs, said Game Digital was a “completely new entity” to the business that had to be rescued from administration in 2012 by the buyout firm OpCapita. He said: “We have gone through a transformation ... we have significantly reduced our costs.”
Game has since halved its UK store count to 327 but maintained market share by growing its online gaming presence and capitalising on last year’s launches of Xbox One and Playstation 4. Mr Gibbs said it had also reduced its reliance on new releases of games and consoles.
Game, now owned by the hedge fund firm Elliott Advisors, expects to make £12m from the float, after costs, including underwriting fees, of £8m. The funds will be reinvested in the business to support growth, Game said.
Mr Gibbs denied that the company was looking to ride the recent IPO wave among retailers, as investors begin to exercise caution. Last week shares in Card Factory slid as much as 10 per cent, while Patisserie Valerie was priced at the bottom end of its price range.
Tarlok Teji, an analyst at Manchester Business School, said: “Investors are looking at [floats] with a much more critical eye. Game’s biggest problem was property, which it has reconfigured, but there is a question over the lifespan of the paid-for physical and online games market.”
Nick Bubb, an independent retail analyst, said investors are still nursing “burnt fingers” over Game’s administration. He added, however, that its rationalised store base and digital development have improved its prospects.
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