Why some investors are excited about Ryan Cohen as GameStop’s next chairman

Save us, Ryan —

Why some investors are excited about Ryan Cohen as GameStop’s next chairman

Move comes as GameStop tries to cash in on its persistent stock surge.



Kyle Orland






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Ryan Cohen in 2019, probably contemplating ways to turn around struggling brick-and-mortar retailers…


Struggling

video game retailer GameStop

announced Thursday

that it intends to name Chewy.com co-founder Ryan Cohen as chairman of its board of directors following its next stockholder meeting on June 9. The move seems likely to further encourage some investors who

continue to be bullish on GameStop stock

and see Cohen’s plans to “transform” the retailer as

a key part of its recent sky-high rise in valuation

.

Cohen, who

sold pet-supplies retailer Chewy to PetSmart for $3.5 billion in 2017

, has traditionally been cautious with his investing strategy, putting money into big, safe stocks like Apple and Wells Fargo. But Cohen bought a roughly 10 percent stake in GameStop

last August

, when short sellers thought the already-depressed stock would continue to lose value. He

increased that stake to 13 percent in December

, earning a number of seats on the company’s board in the process.

During his time with the retailer, Cohen hasn’t been shy about pushing for GameStop to “promptly pivot from a brick-and-mortar mindset to a technology-driven vision,” as he put it in

a November SEC filing

. “If GameStop takes practical steps to cut its excessive real estate costs and hire the right talent, it will have the resources to begin building a powerful e-commerce platform that provides competitive pricing, broad gaming selection, fast shipping, and a truly high-touch experience that excites and delights customers.”

“[Cohen] seems to have a vision of what the company should be in the future,” Telsey Advisory Group analyst Joseph Feldman told Ars in January. “It’s more experiential. It makes sense given the changes in the market, so maybe it’ll help speed that along. It’s certainly something worth watching.”

Cohen as corporate savior?

Cohen’s ambitious plans for GameStop have been central to some of the most bullish analyses of GameStop stock

found on Reddit’s WallStreetBets board

and

elsewhere

. Those analyses in turn helped

set off the short squeeze cycle

that caused GameStop’s stock price to spike above $350 in late January after starting the year below $20.

GameStop’s stock price sank back to the $40 range following those peaks, before

shooting up again in February

to prices in the $200 range or above. The stock has continued to largely defy gravity since then, closing at just under $180 Wednesday despite

continued disappointing earnings

and

analyst estimates

suggesting a $27 median stock price target.

(GameStop’s stock price was up about 10 percent immediately following the announcement Thursday morning but was back down near its previous close by the early afternoon.)


prevented GameStop itself from cashing in on this stock price surge

back in January. Earlier this week, though, the company

announced plans

to sell up to 3.5 million shares of new stock to raise up to $1 billion in cash (or $622 million at Wednesday’s closing price). That money would be used “to further accelerate [GameStop]’s transformation as well as for general corporate purposes and further strengthening its balance sheet,” according to the announcement.

GameStop’s stock price dipped briefly after the stock sale announcement Monday as some stockholders realized such a sale of new stock could dilute the value of

GameStop’s roughly 70 million outstanding shares

. But the stock has since rebounded as some investors seem confident that the cash infusion will aid Cohen’s ambitious “transformation” plan.

What that planned transformation will actually look like is still a little vague, though. In the company’s

latest earnings call

, GameStop CEO George Sherman said GameStop wants to transform “into a customer-obsessed technology company that delights gamers.” That involves “additional distribution options to improve delivery speed” and “expanded product offerings” in sectors including PC gaming, mobile gaming, and gaming TVs, he said.

“The emphasis on customer experience is reminiscent of Chewy, which has, since creation, been acclaimed for stellar support,” writes the optimistic author of the bullish

GameStop Due Diligence

website. “Ryan Cohen

recently personally reached out to a dissatisfied customer

, so it is likely this is a top priority of the new management team.”

Over on Reddit’s raucous WallStreetBets community,

a post

announcing the plans for Cohen to become chairman already has over 1,400 mostly giddy comments in just a few hours. “OH MY GOD ITS HAPPENING, STAY CALM EVERYONE” reads

one characteristically enthusiastic comment

.

Author: Kyle Orland

Source: Kyle Orland.” Why some investors are excited about Ryan Cohen as GameStop’s next chairman”. Retrieved From https://arstechnica.com/?p=1755412

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