GameStop Investors Plan to Nominate Four Directors

(Bloomberg) -- A pair of investors in GameStop Corp. plan to nominate four directors to the board of the video game retailer.

Hestia Capital Partners and Permit Capital Enterprise Partners, which collectively hold 1.2 percent of GameStop’s outstanding shares, plan to put forth the directors after attempts to engage the company in ongoing discussions failed to gain traction, the investors said in a statement Thursday.

The investors currently plan to run three of the four nominees, according to the statement.

A representative for the investors declined to comment.

GameStop will review the notice of nominations to determine whether it complies with its corporate governance rules, the company said in a statement Friday. Its board will present its recommendation on the nominees in its proxy filing, it said.

GameStop also said that it had negotiated "earnestly and in good faith" with the investors about additions to its board before the conversations fell through, according to the statement.

Hestia and Permit began publicly agitating at GameStop earlier this year after its shares tumbled following a failure to find a buyer.

GameStop rose 0.7 percent to $10.26 at 9:36 a.m. in New York trading, giving the Grapevine, Texas-based company a market value of about $1 billion. Its stock is down about 18.9 percent this year.

Its shares have underperformed in recent years due to a "stale board" that "is not functioning well," the pair said in a letter to the company’s board on March 13.

A recent move to retire certain debt and approve a new $300 million share buyback program were insufficient, they said in the letter, adding that a refreshed board would be needed to optimize the business, return capital to shareholders, rebuild leadership and assess the company’s failed sales process.

The investors plan to nominate Kurt Wolf, Hestia managing member, for election to the board at the company’s annual general meeting, according to the statement Thursday. They also plan to nominate former majicJack Vocaltec Chief Executive Officer Don C. Bell; Roblox Corp. Director Christopher Carvalho and Lizabeth Dunn, founder and CEO of Pro4ma Inc.

GameStop, the largest independent retailer of video games in the world, is facing a technology shift from physical game sales to virtual ones. Attempts to diversify, including the acquisition of AT&T Inc. wireless stores, have been reversed after disappointments.

A new chief executive officer, George Sherman, was named this month who will take it over on April 15.

--With assistance from Christopher Palmeri.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Matthew Monks, Michael Hytha

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