Video game chain GameStop readies IPO

After spinning off Barnes&Noble.com, Barnes & Noble is set to sell a stake in another technology-oriented unit. But despite the IPO, the book retailer will still be calling the shots.

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Barnes & Noble is taking another technology-oriented subsidiary public.

Almost three years after spinning off Barnes&Noble.com, the book retailer is selling a stake in GameStop, its retail video game chain.

GameStop raised about $325 million in an initial public offering late Tuesday.

The video game retail chain sold about 18.1 million shares of its Class A stock at $18 per share, the midpoint of its previously announced price range, the company said Tuesday. GameStop stock will begin trading Wednesday on the New York Stock Exchange under the symbol "GME." After paying underwriter costs, GameStop will net about $300 million from the stock sale.

The GameStop deal comes amid a modest upswing in the market for initial public offerings. Synaptics, which makes touch pads for laptop computers, completed a successful IPO late last month. Meanwhile, online payments company PayPal plans to launch its IPO later this week.

GameStop operates 1,038 stores in the United States, Puerto Rico and Guam, as well as GameStop.com. The company is an aggregation of a number of formerly independent software and video game stores, including Babbages, Software Etc. and FuncoLand. Although the company is converting most of its stores to the GameStop name, many still operate under their old monikers.

GameStop's history dates back to 1987, when Barnes & Noble founder Leonard Riggio created Software Etc. When Software Etc. merged with Babbages, Riggio stepped back from the combined company, which later went into bankruptcy. Riggio bought the company out of bankruptcy in 1996 and later sold it to Barnes & Noble.

Despite the offering, Barnes & Noble will retain effective control over GameStop. Although it is selling all of GameStop's Class A stock, Barnes & Noble is retaining 100 percent of the company's 36 million shares of Class B stock. Class A stockholders have one vote per share, but Class B stockholders are entitled to 10 votes per share. Thus, Barnes & Noble will have about 95 percent of the voting power at GameStop after the spinoff.

Although GameStop has been around longer than some other companies going public today, it still faces similar financial pressures. The company posted a net loss of $11.8 million, or 33 cents per share, on $606.9 million in revenue for the 39 weeks ended Nov. 3, 2001. For the company's fiscal year that ended Feb. 3, 2001, GameStop lost $12 million, or 33 cents per share, on $756.7 million in revenue.

GameStop estimates that it will net about $302 million from the IPO, according to a Securities and Exchange Commission filing. But it said it planned to use $250 million to repay debts to Barnes & Noble, leaving it with about $52 million for working capital and other "general corporate purposes."