GameStop Taps Amazon Vet as CEO; Share-Sale Plan Sinks Stock
(Bloomberg) -- GameStop Corp. is tapping a pair of Amazon.com Inc. executives to lead the company and may sell millions of additional shares to raise money, part of a drive to convert the brick-and-mortar chain into an e-commerce powerhouse.
Matt Furlong, who oversaw Amazon’s Australian business, will become chief executive officer of GameStop, while fellow Amazon veteran Mike Recupero will serve as chief financial officer, the video-game seller said Wednesday. Furlong starts on June 21, and Recupero begins work July 12.
“It seems like they’re committed to the playbook of bringing in some Amazon DNA to run the company,” said Doug Clinton, managing partner at Loup Ventures. “The substance will come when we start hearing about the long-term plan.”
The stock sale involves as many as 5 million shares offered through a so-called at-the-market program, and the prospect of dilution didn’t sit well with current investors. The shares tumbled as much as 14% to $261.61 in late trading following the announcement. GameStop also disclosed an investigation by the U.S. Securities and Exchange Commission into recent trading activity.
The management changes are part of a vision laid out by activist investor Ryan Cohen, who became GameStop’s chairman at its annual meeting Wednesday. He’s orchestrated a shake-up of management, with an eye to shifting GameStop away from its roots as a mall-based retailer and toward selling a broad range of products online.
Along the way, GameStop became the face of meme stocks -- shares that trade more on social-media buzz than underlying fundamentals -- and the stock has surged more than 1,500% in 2021.
The unusual trading of GameStop and others has drawn the interest of the SEC. GameStop said Wednesday that it received a request from the agency’s staff for “voluntary production of documents and information concerning a SEC investigation into the trading activity in our securities and the securities of other companies.” GameStop doesn’t expect the inquiry to adversely affect the company.
As for the retailer’s turnaround, Cohen cautioned Wednesday that it would take time.
“We have a lot of work in front of us,” he said during the annual meeting. “Moving forward, we want you to judge GameStop based on our actions -- not our words.”
Cohen announced a stake in GameStop last year and began pushing for changes at the video-game retailer. He now owns 13% of the company and has three seats on its board. While some investors had hoped Cohen would lay out a detailed plan for turning GameStop around, “that’s not going to happen,” he said. “You won’t find us talking a big game, making a bunch of lofty promises or telegraphing our strategy to the competition.”
For investors, GameStop’s news Wednesday was a mixed bag. The new leadership has the right experience for the hoped-for comeback. And the company reported stronger-than-expected first-quarter results and gave an upbeat view on more recent sales, saying they were up 27% in May compared with last year.
But the share sale and SEC news dampened the enthusiasm. Some investors also may have been disappointed that Cohen himself didn’t become CEO, Loup Ventures’ Clinton said. Cohen previously ran pet-supply site Chewy, which he sold to PetSmart and a British private-equity firm in 2017 for $3.35 billion.
GameStop’s sales came in at $1.28 billion in the fiscal first quarter, which ended May 1. Analysts projected $1.17 billion. GameStop’s loss was 45 cents a share, excluding some items, compared with a projected deficit of 71 cents.
The company didn’t offer future guidance, in line with past quarters. Its earnings conference call lasted 11 minutes, and the retailer’s executives took no questions. Outgoing CEO George Sherman said he’ll work to ensure a smooth executive transition. He said he and his team “helped bring stability” to the business and returned it to growth.
GameStop still has thousands of physical stores and faces an industry shifting inexorably online, but it’s less burdened than many struggling retailers. It recently redeemed its long-term debt early, earning upgrades from credit agencies like Moody’s, and raised money for the turnaround effort through a stock sale.
The stock had reached all-time high of $483 in January, before slumping and then rallying again. It was up less than 1% to $302.56 Wednesday at the close.
“We’re still kind of in a phase where the results don’t matter, given what’s going on,” said Matthew Kanterman, an analyst at Bloomberg Intelligence. “Clearly people are still interested in GameStop’s ability to pivot to a broader e-commerce platform than a brick-and-mortar console games retailer.”
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