The struggling video game retailer GameStop announced on Thursday that it intends to appoint Chewy.com co-founder Ryan Cohen as chairman of its board after its next shareholders’ meeting on June 9. It seems likely that investors who are still bullish will continue to encourage further. on GameStop stock and sees Cohen’s plans to “transform” the trader as a significant part of its recent high rise in valuation.
Cohen, who sold Chewy to PetSmart for $ 3.5 billion in 2017 for $ 3.5 billion, has traditionally been cautious about his investment strategy by investing in large, safe stocks such as Apple and Wells Fargo. But Cohen bought a 10 percent stake in GameStop last August, when short sellers thought the shares, which were already depressed, would still lose value. He increased the stake to 13 percent in December and earned a number of seats on the company’s board.
During his time at the dealership, Cohen was not ashamed to push for GameStop to ‘immediately turn from a brick-and-mortar mindset to a technology-driven vision’, as he put it in an SEC filing November. “If GameStop takes practical steps to reduce its excessive real estate and recruit the right talent, it will have the means to build a powerful e-commerce platform that offers competitive pricing, wide game selection, fast shipping and a truly high price. provides a touching experience that excites and delights customers. “
“[Cohen] He seems to have a vision of what the company should be in the future, “Joseph Feldman, an analyst at Telsey Advisory Group, told Ars in January. It’s more experiential. Given the changes in the market it makes sense, maybe it will help speed it up. This is definitely something worth checking out. ‘
Cohen as corporate savior?
Cohen’s ambitious plans for GameStop were central to some of the most bullish analysis of GameStop shares found on Reddit’s WallStreetBets board and elsewhere. These analyzes, in turn, helped to curb the short pressure cycle that caused GameStop’s share price to rise above $ 350 at the end of January after the year started below $ 20.
GameStop’s share price plummeted to the $ 40 range, before soaring to $ 200 or higher in February. The stock has since continued to challenge gravity to a large extent, closing at just under $ 180 on Wednesday, despite continued disappointing earnings and analysts’ analysis suggesting a median price target of $ 27.
(GameStop’s share price rose about 10 percent immediately after the announcement Thursday morning, but was lower again in the early afternoon than the previous close.)
SEC rules prevented GameStop itself from rising this share price in January. Earlier this week, however, the company planned to sell up to 3.5 million new shares to raise up to $ 1 billion in cash (or $ 622 million at Wednesday’s closing price). That money would be used to accelerate further [GameStop]’s transformation as well as for general corporate purposes and the strengthening of its balance sheet, “according to the announcement.
GameStop’s share price fell shortly after the announcement of shares, as some shareholders realized that a sale of new shares could dilute the value of GameStop’s approximately 70 million outstanding shares. The stock has recovered since then, as some investors appear confident that Cohen’s ambitious ‘transformation’ plan will help Cohen.
What the planned transformation will actually look like, however, is still a bit vague. In the company’s latest earnings call, GameStop CEO George Sherman said GameStop wants to transform “into a customer-driven technology company that delights players.” It includes ‘additional distribution options to improve delivery speeds’ and ‘extensive product offerings’ in sectors including computer games, mobile games and TVs, he said.
“The emphasis on customer experience is reminiscent of Chewy, which has been awarded for excellent support since creation,” writes the optimistic author of the bullish GameStop Due Diligence website. “Ryan Cohen recently reached out personally to a disgruntled customer, so that’s probably a top priority for the new management team.”
About the reddit WalldreetBets community of Reddit, a message announcing Cohen’s plans to become chairman has already announced more than 1,400 comments in a matter of hours. ‘O MY GOD HAS HAPPENED, KEEP CALM EVERYONE’ reads one characteristic enthusiastic remark.