GameStop fires CEO, posts bigger-than-expected quarterly loss

GameStop fires CEO, posts bigger-than-expected quarterly loss

Ryan Cohen, the billionaire investor whose bold bet on GameStop made him a hero to stock trading memes, took over as chief executive 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 rollercoaster ride that began in early 2021 when retail investors flocked to prove that hedge funds were banking on GameStop’s demise.

Some analysts are questioning whether Cohen can turn GameStop around two years after becoming chairman. The new executive role in his previous role gives him control over capital allocation, evaluating potential investments and acquisitions and overseeing the managers of the company’s holdings, GameStop said in a regulatory filing.

The firing of CEO Matt Furlong comes almost exactly two years after GameStop brought the former executive back to the United States from Australia, where he worked.

GameStop did not say why Furlong was shut down or if it plans to replace it, and did not respond to a Reuters request for comment. Cohen and his representative 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 resigned from the board. GameStop added that his resignation from the board “did not result from any disagreement with the company on any matter relating to the company’s operations, policies or practices”.

GameStop said in the lawsuit that Furlong would receive any remaining payments and benefits he was entitled to under his CEO contract, subject to him waiving any claims against the company in a timely manner.

In an apparent play on words, Cohen tweeted after the announcement of Wednesday’s dismissal of Furlong “not for long”.

GameStop, which is valued at around US$8 billion (nearly INR 66,000 crore), agreed to appoint Cohen as chief executive on Wednesday and reduced the size of its board from six directors to five, according to the filing.

Mark Robinson, GameStop’s lead attorney, was appointed as the company’s general manager, with his duties including “oversight of other chief executive officers in addition to the chief executive”. He will report to Cohen.

Cohen, who made his fortune selling online pet care retailer Chewy for $3.5 billion (nearly Rs. 28,880 crore) in 2017, joined GameStop’s board in early 2021 and was elected chairman in June 2021.

With plans to turn the company into an e-commerce powerhouse, Cohen revamped his top brass by bringing in a host of Amazon executives. But many of the hires, often drawn from Cohen’s personal network and vetted by him, didn’t last long.

Cohen also backed away from plans to develop e-commerce, relying more on GameStop’s physical stores and using them as places where customers can pick up orders online.

GameStop said on Wednesday that net sales for the three months to April fell by 10% to US$1.24 billion (nearly INR 10,230 crore), marking the fourth consecutive drop in quarterly revenue.

Since Furlong’s appointment was announced, GameStop’s stock has lost more than half its value and is down about 65% since June 2021. Cohen is the company’s biggest investor.

Furlong isn’t the first GameStop top executive to leave after a short stint. Former chief operating officer Jenna Owens left 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 total lack of strategy. They wanted to be like Amazon and they hired … from Amazon in 2021,” said Michael Pachter, an analyst at Wedbush Securities.

GameStop said it will not hold a conference call to discuss the quarter.

mixed success

Since making his first investment in GameStop, Cohen has turned himself into an activist investor, a reputation he has bolstered with bets last year on Bed Bath & Beyond 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 board seats last year, filed for bankruptcy earlier this year. At Nordstrom, news of Cohen’s holding sent the stock price higher, but he quietly withdrew his nomination for two directorial candidates after pressuring the company to replace the Nordstrom director, who had been CEO of Bed Bath & Beyond. Nordstrom’s stock price has dropped 29% over the past 52 weeks.

While Cohen arrived at GameStop after building Chewy into a powerhouse, industry analysts and some investors now question his ability to revive other retailers.

Wedbush’s Pachter said Cohen “is incapable of running a retail operation. … It’s like Elon Musk running Twitter.”

In Bed Bath, Cohen sold his stake in August, just months after reaching the deal in March, sending the share price crashing.

“While ‘meme traders’ love Ryan Cohen, this is not ‘Plan A’. This (GameStop) is a business in decline and a Hail Mary pass for investors to look to Cohen to turn it around,” said Thomas Hayes, president of Great Hill Capital LLC.

© Thomson Reuters 2023

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