Geeknet, Inc. (GKNT) Doubles on Buyout by Hot Topic

Fairfax, Virginia, based Geeknet, Inc. (GKNT) saw its share price more than double on Tuesday, against the backdrop of a down day in stocks across the board. Geeknet stock was up $9.10, rising 115.19% on volume of 2,410,433 shares, to close at $17.00. Early Tuesday morning, the company announced that it was acquired by teen apparel retailer, Hot Topic.

Founded in 1993, Geeknet, Inc. is an online network for the "global geek community", which is described as being technology professionals, enthusiasts and general consumers of technology-oriented goods, services and media.
Its e-Commerce segment sells geek-themed retail products through its ThinkGeek web site. Geeknet's Media segment is comprised of a network of web sites targeted at information technology enthusiasts, managers and decision-makers. The company's stock trades on the NASDAQ exchange.

Founded in 1988, Hot Topic is a teen-oriented apparel and accessory retailer. The company's core product line are rock T-shirts, featuring popular rock bands. The company operates more than 650 stores across North America. Hot Topic is based in Los Angeles, California, and is owned by private-equity firm Sycamore Partners.

The two companies announced the sale, in which Hot Topic will pay $122 million. Hot Topic will pay $17.50 per share for the Geeknet's stock, and the tender offer for the company will commence no later than June 19.

The prize in the buyout is Geek net's ThinkGeek website segment. ThinkGeek offers clothing, toys and paraphernalia related to popular TV shows, movies and various brands that appeal to the geek market. They sell products related to Marvel Comics, movies such as Star Trek and Star Wars, and TV shows such as The Big Bang Theory. Geeknet will become a Hot Topic subsidiary, and by extension, so will ThinkGeek.

"We are pleased to have entered into this agreement and look forward to adding Geeknet's innovative products and services to our portfolio," said Lisa Harper, Chief Executive Officer of Hot Topic. "Geeknet's unique concept and approach to the online retail community is a strong fit with our business strategy, which is focused on delivering great products for avid fans of various licensed properties, and we are excited about the opportunity to help drive profitable growth and further enhance value for Geeknet's customers."

"Our Board and management team believe this transaction is in the best interest of the Company and its stockholders," said Kathryn McCarthy, Chief Executive Officer of Geeknet. "We remain focused on increasing our visibility, providing a platform to stimulate ideas and creativity, and expanding our product offerings to keep up with industry and customer demands. As a subsidiary of Hot Topic, Geeknet will be well-positioned to achieve these goals."

Not everyone is pleased with the buyout however. Shortly after the buyout was announced, several law firms announced the initiation of investigations of Geeknet's board of directors. Law firms such as Levi & Korsinsky, Faruqi & Faruqi, and Harwood Feffer, were among at least a half dozen law firms bringing actions. Brodsky & Smith, another law firm involved in the case, announced that it is investigating potential claims that the Board of Directors of Geeknet may have breached fiduciary duty in connection with the sale of the company to Hot Topic. At issue is whether or not Hot Topic is underpaying for Geeknet, resulting in losses for long-term holders of Geeknet's stock.

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Published on May 27, 2015
By Kevin Mercadante

Copyrighted 2016. Content published with author's permission.

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