GameStop Sued by BCG Over Unpaid Bills For Helping Company
GameStop Sued by BCG Over $30 Million Bill to Overhaul Company
(Bloomberg) -- GameStop Corp.’s stockholders may be enjoying the biggest rally of the year, but not everyone is happy.
Boston Consulting Group claims it hasn’t been paid about $30 million in fees for its work “setting the company on a more sustainable path” in 2019.
More than a year before a Reddit-induced trading frenzy drove GameStop’s share price up 1000%, the management consultant known as BCG was hired to bring the struggling retailer out of a slump, the lawsuit said. A plan was agreed on to overhaul the business, including the video game and pre-owned electronics operations.
BCG spent “tens of thousands of hours” on the project and “overachieved” by creating more profit improvement opportunities than were initially estimated, according to the complaint filed Tuesday in Delaware federal court.
GameStop said it will fight the suit, which it said lacks merit and reflects BCG’s “prioritization of excessive fees over clients’ interests.”
“It is confounding that the high-priced consultants at BCG claim to have delivered hundreds of millions in value for GameStop during a period when share price, sales and debt were at perilous levels,” GameStop said in an emailed statement.
The lawsuit doesn’t get into how GameStop has churned through a variety of business concepts in recent years with mixed reactions from investors and customers. There’s also no mention that in January 2021, an army of retail traders fueled a stock surge partly in a revolt against hedge funds betting against the company.
Instead, BCG alleges that under the management of the retailer’s chief financial officer at the time, invoices went unpaid “despite there being no legitimate dispute over BCG’s full performance and the fees coming due.”
BCG also claimed credit for a revamp of GameStop’s loyalty program that increased membership signups by more than 40% and generated a profit improvement of $73 million, “well beyond the original expectation.”
GameStop said it’s “proud” it no longer uses the consulting group’s services.
“We do not believe it is in our stockholders’ best interests to pay the tens of millions of dollars sought by BCG, especially given their seemingly meager impact on the company’s bottom line,” GameStop said in the statement.
©2022 Bloomberg L.P.