GameStop shares rose after the video-game retailer revised the terms of a convertible-note exchange that will eliminate about $1.4 billion of long-term debt while using relatively little of the company’s cash.
Under the amended agreement, noteholders will receive roughly 55.5 million shares of GameStop Class A common stock and about $358.4 million in cash. The original terms called for the exchange to be settled entirely in stock.
The revised structure reduces GameStop’s debt burden but will also increase the number of shares outstanding, creating additional dilution for existing shareholders.
The move comes as GameStop continues to reshape its business around collectibles, investments and a smaller retail footprint.
For the quarter ended May 2, the company reported revenue of $835.3 million, up 14% from a year earlier. Collectibles revenue jumped 65% to $348.9 million and became GameStop’s largest business segment, accounting for nearly 42% of net sales.
Hardware and accessories revenue declined 3.4% to $333.7 million, while software revenue fell 13% to $152.7 million.
Gross profit rose 34.6% to $340.3 million, helped by the shift toward higher-margin collectibles. Net income climbed to $389.6 million, though a large portion of the gain came from unrealized gains tied to derivative investments linked to eBay.
GameStop has continued to deepen its exposure to eBay after an unsuccessful takeover approach earlier in the year. The company converted its derivative position into a direct equity investment and held approximately 43.4 million eBay shares as of Aug. 1, valued at about $4.95 billion.
For its second quarter, GameStop expects net sales of $780 million to $800 million, down from $972.2 million a year earlier. The company attributed the decline in part to the prior-year launch of the Nintendo Switch 2, its planned exit from France and continued store closures.
Profit expectations remain stronger. GameStop expects operating income of $150 million to $170 million and net income of $290 million to $310 million, including gains tied to its eBay investment.
The company’s shares remain below year-ago levels, but the latest debt move was welcomed by investors as another step toward a cleaner balance sheet.