The Wall Street Journal spoke to current and former GameStop board members to break the news on conclusions GMEdd drew four months ago. 

The story GameStop’s Power Player: How Outsider Ryan Cohen Wrested Control by Sarah E. Needleman at the Wall Street Journal released today describes an inside look at how the founder of Chewy took over a struggling gaming retailer.

Strikingly enough, GMEdd already published most of these details by analyzing digital breadcrumbs, without speaking to any confidential sources.

The story begins in 2019

Back in May, GMEdd.com revealed that Ryan Cohen had started to build his GameStop position as early as 2019, which has now been discovered by the Wall Street Journal.

To recap, the company was hoping for a buyout after years of unfruitful executive shakeups.

In early 2019, GameStop tried and failed to sell itself after years of stagnant growth and corporate strategy missteps. That spring, it hired a new CEO, George Sherman, a veteran of retailers including Advance Auto Parts. Mr. Sherman was GameStop’s fifth CEO in less than two years. Later in 2019, Mr. Cohen began building his stake. [WSJ,  Aug. 12 2021]

The WSJ now reports that Ryan Cohen’s swift accumulation of power at GameStop was orchestrated from his Florida beachfront apartment as the result of a series of previously unreported moves, people familiar with the matter said.

August 2020 ownership disclosure by Ryan Cohen and RC Ventures.

In May, GMEdd wraps up the history of Ryan Cohen’s initial GameStop strategy as:

Ryan Cohen started buying into GameStop in April of 2019, with a disclosure following increased holdings in August 2020. It’s unknown as to when he made the decision and how much time was spent beforehand figuring out activist investor logistics coinciding with a PR blitz, but it is reasonable to assume he was strategically building public-facing credibility for himself before revealing his high-stakes investment. [GMEdd, May 29 2021]

Have a seat

The WSJ reports that as GameStop’s board learned of Ryan Cohen’s stock purchases the directors offered him a board seat, according to current and former board members.

This aligns with the detail pointed out by GMEdd’s own Rod Alzmann that GameStop’s Investor Relations had referred to Ryan Cohen as a great shareholder since April of 2019.

Rod Alzmann’s rough notes after speaking to GameStop IR in late 2020.

The confidential sources claim that Cohen turned down the entreaty, telling directors that a sole board seat would give him no meaningful influence over decision making.

In November, Ryan Cohen released his famous letter stating just that.

According to these sources, the board responded to Cohen’s November 2020 letter by hosting a private call with the activist investor.

kill the cash cushion

The WSJ reports that Cohen erupted the following month when GameStop said it would sell $100 million in new stock.

Directors claim that the topic hadn’t come up on his call with the board.

Cohen, a 12.9% shareholder of GameStop at the time, reportedly worried the plan would damage the company’s standing among investors by reducing the value of existing shares.

The confidential source reveals that in response, Cohen wrote an email to GameStop’s then-chairwoman, Kathy Vrabeck, warning her that he would go public with his disapproval if the company proceeded with the sale.

Verbatim, we imagine the email went something like this.

Cohen urged her to share the email with other directors, people familiar with the matter said. The company shortly after scuttled the planned stock sale, for reasons undisclosed.

A former board member claims that Cohen made a significant power move here.

The ill-timed stock offering created a wedge and he used it to his advantage.

Reportedly leery of a prolonged fight and open to new ideas to improve the business, the board invited Cohen and his former business partners Jim Grube and Alan Attal to join in January.

“Welcome” aboard

The sources claim that Ryan Cohen approached his first board meeting, held over videoconference that same month, as a blitz.

Cohen also attended the Annual Shareholders Meeting via videoconference in June.

In his first meeting on the board, Cohen reportedly proposed the formation of a new committee to review GameStop’s strategy for spending and hiring.

Cohen requested this committee consist of himself, fellow activist investor Kurt Wolf and former Chewy executive Alan Attal. Some members of the board said they worried about permitting Cohen so much power on subjects of day-to-day management, but the proposal was approved.

GameStop announced the committee via News Release on March 8th.

The WSJ reports that Mr. Cohen proceeded to personally recruit new talent, including executives from Amazon.com Inc., Alphabet Inc.’s Google, and Chewy, all big names that GMEdd has been tracking hires from since May.

Cohen reportedly countered other executives that questioned his decisions, telling them that “the pace of change needed to quicken.”

In an instance shared by people familiar with the matter, Ryan Cohen asked a company executive to sign a deal to lease a new fulfillment center, hoping to speed up delivery times for customers’ online orders.

The executive reportedly pushed back with the belief that such a request from a director was unusual and against company policy that called for such contracts to undergo vetting that included multiple executives. The project later moved forward.

Sudden rise

GameStop directors were reportedly concerned about the sudden rise in valuation.

The board debated whether to discuss it publicly and whether the stock volatility could lead to shareholder lawsuits, current and former directors said.

Few directors other than Mr. Cohen were familiar with Reddit, the social network where speculative investors began to conjugate, board members said.

GameStop quickly became Reddit’s stock market darling.

The WSJ reports that Ryan Cohen’s rapidly-growing celebrity status, combined with his tendency to dabble in the company’s operations, earned him fans neither in the boardroom nor among GameStop’s executive ranks.

“Ryan personified a hero against the hedge funds,” a former board member said

One GameStop director, PetSmart Inc. chief executive J.K. Symancyk, on multiple occasions told board members that Chewy under Mr. Cohen was unprofitable and later required a full information-technology overhaul, according to people familiar with the discussions.

Several directors interpreted the remarks from Mr. Symancyk, who met Mr. Cohen in the process of joining PetSmart, as criticism. Others reportedly viewed the commentaries as matter-of-fact descriptions.

Get the bell out

In an effort to gain more control of GameStop’s spending,  Cohen pushed for finance chief Jim Bell to be the first senior executive to go, people familiar with the matter said.

It worked.

On February 23rd, 2021, GameStop announced Jim Bell’s resignation via News Release.

A handful of top executives, including CEO George Sherman, considered stepping down and claiming their contracts had been breached because of the reduction in their duties due to the board member’s involvement in corporate affairs, a person familiar with the matter said. 

The WSJ reports that the new board member was brash and outspoken, while George Sherman, 60, tended to keep to himself, people who know them both said. 

Though Mr. Sherman worked through most of the pandemic in GameStop’s Texas headquarters, it was Mr. Cohen, on all-hours video calls from his apartment, who called many of the shots, according to board members.

On top of this, new employees, likely appointed by Cohen, frequently sought out the brash new board member directly with questions about the business or operations, bypassing the CEO, people familiar said.

Ryan Cohen encouraged Mr. Sherman to step aside, and in April he agreed.

George Sherman officially departed GameStop in June.

In private conversations, Cohen reportedly expressed shock that even executives with relatively short tenures could leave with lucrative stock awards.

Moving Forward

In conversations with directors and executives, the new Chairman emphasized improving the experience for GameStop customers, predicting that gamers will support the company if it provides better service, competitive prices and faster shipping.

The WSJ claims that people familiar with the matter said that through midsummer, GameStop has hired more than 80 new employees with technology experience.

Huh. Wonder where they got that data.

View GMEdd’s latest tech hire report, detailing over 100 tech hires, at GMEdd’s Reports and Model page.

While the former board had intentions to sell shares at sub-$20 for an insignificant cash cushion, Ryan Cohen has raised more than $1.6 billion at greater than $200 per share, eliminating the company’s long-term debt and funding a transformation that will be studied in business schools for decades.

Power to the players.

Source: Wall Street Journal

On Tuesday, July 27th, the S&P Dow Jones Indices has announced that GameStop is set to join the S&P MidCap 400, effective August 4th.

S&P SmallCap 600 constituent GameStop Corp. (NYSE:GME) will replace Weingarten Realty Investors (NYSE:WRI) in the S&P MidCap 400.

Lakeland Financial Corp. (NASD:LKFN) will replace GameStop in the S&P SmallCap 600.

These changes are effective prior to the opening of trading on Wednesday, August 4.

The S&P 400 index serves as a barometer for the U.S. mid-cap equities sector and is the most widely followed mid-cap index.

The Standard & Poors  July 27, 2021 Press Release

The S&P MidCap 400® provides investors with a benchmark for mid-sized companies. The index, which is distinct from the large-cap S&P 500®, is designed to measure the performance of 400 mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment.

Standard & Poors states that mid-cap exposure generally captures a phase in the typical corporate life cycle in which firms have successfully navigated the challenges specific to small companies, such as raising initial capital and managing early growth.

At the same time, mid caps tend to be quite dynamic and not so large that continued growth is unattainable.

Source: Standard & Poors Press Release

This morning, Olga Kharif  and Anders Melin of Bloomberg have published an article that details Ryan Cohen‘s past success with Chewy and the talent he, along with his team, bring to GameStop.

The article mentions how Cohen, who takes over as chairman in June, has brought in several of his old Chewy cohorts to help execute his plan, including the mastermind of the customer-service program, Kelli Durkin.

Cohen’s goal is to push the company rapidly into e-commerce, and according to people familiar with his thinking, he plans to borrow heavily from the model he implemented at Chewy to pull off that transition.

The piece also mentions Cohen’s personal background, regarding his lack of a college education and the path of his father inspiring his demeanor.

Cohen, who was born in Montreal, never went to college. He has credited much of his success building Chewy to his father, who ran a glassware business and died in 2019. In person, Cohen has a soft-spoken demeanor, revealing little of his shrewd business instincts and ability to drive bargains with suppliers, former colleagues say.

Kharif and Melin also delve into Cohen’s mischievous Twitter usage, something we have spent hours speculating on.

Cohen has embraced the mischievous spirit of Elon Musk as he pursues a GameStop comeback. Like Tesla Inc. ’s prankster-king, he posts goofy and sometimes mysterious images on social media (a poop emoji over a picture of a Blockbuster store or the stuffed bear from the movie “Ted” using a bong ). That’s helped him win over the Reddit crowd, which turned GameStop into a so-called meme stock.

While none of this is news to GMEdd readers, it is bullish to see the press picking up on the real story behind the  GameStop investment thesis.

Check out the article to read more

Source: Bloomberg

On April 15th, GMEdd.com Co-Proprietor Rod Alzmann spoke with Hedgeye Retail’s Jeremy McLean for a Hedgeye TV talk. Jeremy and Brian McGough over at Hedgeye Retail had placed $GME as their best idea long on December 17th, 2020

The retail investor duo shared their thoughts on GMEdd, Ryan Cohen, and GameStop’s path moving forward.

Tae Kim, a technology columnist for Bloomberg Opinion, has published an article titled, “GameStop Stock Mania Is Making Its Turnaround Possible” The article references how the $1B offering is bullish for GameStop and allows Ryan Cohen to fund his transformation moving forward, shifting away from the traditional retail experience. 

It is a prudent and necessary move. With GameStop’s share price up nearly 900% this year, the company will be able to raise significantly more funds to expand its e-commerce capabilities. The turnaround plan outlined in its latest annual report includes building fulfillment operations for faster delivery times, overhauling its website and starting a U.S.-based customer service operation. All these initiatives are needed to improve GameStop’s customer experience and will require significant investments.

Tae Kim has been reporting on GameStop’s fundamentals since long before the volatility of January, so we recommend checking him out.

Source: Bloomberg Opinion

In this Benzinga Power Hour clip from Thursday, April 1st, leading GameStop analyst and GMEdd.com Co-Proprietor  Rod Alzmann discusses his current life in the theta-gang. After sharing his thoughts on selling cash-secured puts on $GME, Rod explains how his projections are even higher than before, justified by GameStop’s latest corporate developments including recent Amazon and Chewy hires.

Rod and Luke also reflect on the insane premiums traders face in the $GME options chain.

Source: Benzinga on YouTube

Revealed via Bloomberg terminal, Third Bridge Forum will be hosting the interview ‘GameStop — E-Commerce Transformation & Structural Business Overview’ tomorrow, March 30th, at 3PM ET.

The agenda reveals the discussion will focus around:

  • Key competitive dynamics in the video game retail industry — GameStop, Walmart, Best Buy, and Target
  • Revenue analysis of GameStop’s existing business segments — new, pre-owned and accessories
  • Digital transformation efforts — online sales and penetration growth methods
  • Foot traffic recovery trends post-pandemic
  • Near-term risks highlighting public image and longer-term outlook.

This event will serve as a discussion for analysts to share their thoughts on GameStop’s existing and developing retail experience alongside the greater video game retail industry. The spread of fear, uncertainty and doubt from some is inevitable. It is unknown whether or not an official from GameStop will be present, but it would be unprecedented.

When Gamestop announced their strategic multi-year partnership with Microsoft on October 8th 2020, the relevant Third Bridge Forum interview was not until October 21st, 2 weeks later. Knowing this, we can assume they will be discussing information that we already know, likely analyzing the most recent 10-K filing. 

Constructive chatter amongst Wall Street about the future of GameStop is always welcome, and we look forward to hearing what viewpoints are shared.

Maybe Ryan Cohen will drop some news pre-market so they have something to chirp about. 

Source: Third Bridge


April 7th 2021 Editorial Update: GMEdd has obtained a copy of the Third Bridge Interview transcript, and it is now available here.

In this clip from What’d You Miss? on Bloomberg TV, GMEdd.com co-proprietor Rod Alzmann speaks with Bloomberg’s Caroline Hyde and Joe Weisenthal about how GameStop is trying to look past lackluster Q4 results that sent the shares sliding today. Rod also discusses how the company has appointed a trio of new executives with tech experience to its ranks.

Source: Bloomberg 

When New Jersey teacher Steven Titus sent emails to GameStop Corp. complaining about the slow shipping of an order, he received a late night call to apologize – from a director on the video game retailer’s board.

Ryan Cohen took it upon himself to speak with the New Jersey teacher.

“I just got your email, I’m so sorry this happened. Let me get to the bottom of this,” Ryan Cohen told Titus.

Ryan Cohen then asked GameStop’s new customer service chief Kelli Durkin, who spearheaded initiatives at Chewy that included written personal notes to customers, to look into the matter.

Titus was reimbursed for his purchase, even though he had not requested a refund and was only complaining about the tardiness of his order.

This phone call is stated to have occured in early March.

As previously speculated, it’s safe to say that some of Ryan’s first initiatives at GameStop will be to revamp the customer service experience, as proven by his recruiting of Kelli Durkin into the role of Senior Vice President of Customer Service at GameStop.

Source: Reuters

In this Benzinga Power Hour clip from today, March 10th, leading GameStop analyst and GMEdd.com Co-Proprietor Rod Alzmann discusses the GameStop’s latest corporate developments alongside the rapid trading halts amid groundbreaking price volatility. Rod and Luke also reflect on the history of GameStop’s share price and what has caused certain price action.

While live on the air, GameStop shares reached a sixth trading halt in only a matter of hours.

Source: Benzinga on YouTube