Ryan Cohen, the billionaire investor whose bold bet on GameStop made him a hero for meme stock traders, took over as CEO on Wednesday after the video game retailer fired its CEO, and posted a bigger-than-expected quarterly loss.
Investors pushed the stock price down more than 20 percent in after-hours trading, continuing a roller coaster ride that began in early 2021 when retail investors tuned in to prove hedge funds betting on GameStop’s demise were wrong.
Some analysts are wondering if Cohen, two years after being named CEO, can turn GameStop around. The new managerial role to his previous role gives him control over capital allocation, evaluating potential investments and acquisitions, and overseeing company investment managers, GameStop said in a regulatory filing.
CEO Matt Furlong’s firing came almost exactly two years after GameStop brought the former Amazon.com exec back to the US from Australia, where he had worked.
GameStop did not disclose why Furlong was terminated or whether it planned to replace him, nor did it respond to a Reuters request for comment. Cohen and his rep also did not respond to requests for comment.
In the regulatory filing, the company said Furlong was fired as CEO on Monday, the same day he stepped down from the board. GameStop added that his resignation from the board “was not due to disagreements with the company on any matter related to the company’s business operations, policies or practices.”
GameStop said in the filing that Furlong would receive all remaining payments and benefits to which he was entitled under his CEO contract provided he “timely” waives all claims against the company.
In an apparent play on words, Cohen tweeted “not for long” after announcing Furlong’s downfall on Wednesday.
GameStop, which is valued at about $8 billion (almost 66,000 crore), on Wednesday agreed to nominate Cohen as chairman of the board and reduced the size of its board from six to five directors, the filing said.
GameStop’s top attorney Mark Robinson has been appointed general manager of the company. His responsibilities included, among other things, “overseeing other senior executives in addition to the CEO.” He will report to Cohen.
Cohen, who made his fortune selling online pet products retailer Chewy for $3.5 billion (nearly 28,880 crore) in 2017, joined GameStop’s board of directors in early 2021 and was elected chairman in June 2021.
With plans to convert the company into a Ecommerce A powerhouse, Cohen has revamped his top positions by hiring a number of senior executives Amazon. But many of the new hires, often drawn from and vetted by Cohen’s personal network, didn’t last long.
Cohen has also scaled back plans to expand e-commerce, relying more heavily on GameStop’s brick-and-mortar stores and using them as places for customers to pick up online orders.
GameStop announced on Wednesday that net revenue for the three months ended April fell 10 percent to US$1.24 billion (nearly Rs.10,230 crore), marking the fourth straight decline in quarterly revenue.
Since announcing Furlong’s appointment, GameStop shares have lost more than half of their value and are down around 65 percent since June 2021. Cohen is the company’s largest investor.
Furlong isn’t the first top GameStop executive to leave the company after a short while. Former chief operating officer Jenna Owens left the company in October 2021, just seven months after joining, and former chief financial officer Michael Recupero, who was hired at the same time Furlong was hired, was fired last year.
The revolving door worried some analysts.
“It reflects the complete lack of strategy. They wanted to be like Amazon and hired at Amazon in 2021,” said Michael Pachter, an analyst at Wedbush Securities.
GameStop said it won’t be holding a conference call to discuss the quarter.
Mixed success
Since his initial investment in GameStop, Cohen has blossomed into an activist investor, a reputation he built on betting on Bed Bath & Beyond last year and more recently Alibaba and Nordstrom.
In each company, he pushed for change with mixed success. Bed Bath & Beyond, where he quickly settled with the company for seats on the board last year, filed for bankruptcy earlier this year. At Nordstrom, news of Cohen’s stake boosted its stock price, but then he quietly withdrew his nominations for two director candidates after urging the company to replace the Nordstrom director, who had previously been CEO of Bed Bath & Beyond. Nordstrom’s share price has fallen 29 percent over the past 52 weeks.
While Cohen joined GameStop after building Chewy into a powerhouse, industry analysts and some investors are now questioning his ability to revitalize other retail companies.
Wedbush Pachter said Cohen “is not fit to run a retail operation. … It’s like Elon Musk running for office.” Twitter.”
At Bed Bath, Cohen sold his stake in August, just months after the March settlement, sending the share price tumbling.
“While the ‘meme dealers’ love Ryan Cohen, this isn’t a ‘Plan A.’ This (GameStop) is a business in decline and a Hail Mary pass for investors who can count on Cohen to turn the tide,” said Thomas Hayes, chairman at Great Hill Capital LLC.
© Thomson Reuters 2023
