Game shares plunge on third profit warning

GAME DIGITAL’S chequered history has come back to bite investors who backed the once-bust retailer’s listing as shares plunged 36pc following its third profit warning.

Game blamed its latest profit warning on a low supply of Nintendo Switch consoles and a weak line-up of new and more complicated games that led to customers spending longer playing one game and buying fewer of them.

The shares nosedived to just 21p on the back of the profit warning, valuing the business at £35.8m only two years after it was floated at 200p a share by US hedge fund Elliott Advisors.

Elliott, well known for its role in the demise of electricals chain Comet, provided more than £100m of financing to Game in return for a 99pc stake after it was bought out of administration in 2012 by Opcapita, which worked alongside Elliott. Elliott cashed in £101m at the time of Game’s market listing by selling a stake and made an extra £59m by dumping a further 10pc of its stake just three months later, despite agreeing to a lock-up period of six months.

Since listing Game Digital has issued profit warnings after disastrous Christmas trading, and has repeatedly lowered profit guidance to the bottom end of expectations.

A person close to the company justified its performance by arguing that the gaming market “was in a very different place to 2014 because of rapidly changing trends”. However, the erosion of value has been painful for Game’s investors, including City fund manager Neil Woodford, who owns 19.5pc.

Game also said that it was negotiating with landlords to reduce its rent costs with 220 leases up for renewal by the end of 2018. It expects better trading in the second half of the year with sales growth between 5pc and 6pc as it hopes to benefit from more supplies of the Nintendo Switch and a “stronger” line-up of games, such as Star Wars Battlefront 2 and Call of Duty WWII.