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Ryan Cohen Blasts GameStop Board As Reboot Talks Fall Apart, Says CEO Stuck In 20th Century Mindset

Aditya Raghunath
·2 min read

Ryan Cohen's RC Ventures LLC is calling for a strategic review of video game and consumer electronics retailer GameStop Corp's (NYSE: GME) business model, the Wall Street Journal reported late Monday. The investment firm is one of the largest stakeholders in GameStop with a 9.98% position.

Ryan Cohen was holdings talks with GameStop’s management in an attempt to expand its online offerings, as reported in September. Cohen suggested he could see GameStop duel with Amazon Inc (NASDAQ: AMZN) for a share in the e-commerce market.

What Happened: The letter, addressed to the GameStop Board on Monday, emphasized the need to shift from being a "video game retailer" and transform into "a technology company" and seize market opportunities in the gaming sector, as reported by the Journal.

Cohen lambasted GameStop’s board for overly relying on brick-and-mortar stores and sought a credible plan to maximize shareholder value. The communication also detailed the erosion of GameStop’s shares in the last five years, lost business opportunities over time, and poor profitability trends from 2011 to 2019 despite a growth spurt in the gaming industry as well as the absence of a strategic vision on the part of the management.

Shifting crosshairs to the GameStop CEO George Shermann, the Chewy Inc. (NYSE: CHWY) co-founder remarked that Shermann's years of expertise in physical stories is hindering the company’s digital growth.

"Regrettably, Mr. Sherman appears committed to a twentieth-century focus on physical stores and walk-in sales despite the transition to an always-on digital world," the letter read. 

Why Does It Matter: Cohen cited statistics from Newzoo, which claimed the global gaming market could grow to $217.9 billion by 2023, from a forecasted $174.9 billion for the current year.

RC Ventures is envisioning GameStop as a technology-driven company with a broad gaming selection and enhanced offerings for customers. Cohen’s investment company also points out that the video game company should curtail excessive real estate costs by revisiting lease agreements for underperforming locations.

Other suggestions included streamlining or disposing-off non-core operations in Europe and Australia, as well as, properly allocating and utilizing cash inflows generated from console cycles.

A GameStop representative told the Journal that the company extended multiple invitations for Cohen to join its board but the latter turned all of them down. The representative said GameStop shared the Chewy co-founder's vision to develop a plan in the best interest of shareholders.

Price Action: After a 9.54% rally during trading hours, GME stock dropped 1.74% during after-hours at $11.85.

Photo by BentleyMall on Wikimedia

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