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GameStop’s stock continues to fall after CFO Jim Bell announced he’s leaving the electronics retail company. Yahoo Finance’s Myles Udland, Julie Hyman and Brian Sozzi share the details.
MYLES UDLAND: Let's take a look at shares of GameStop this morning, though. The stock is up just about one half of 1%. And we've got some actual fundamental news for the business. CFO Jim Bell is going to resign from the company in just about one month at the end of March. Now, the company did not give a ton of details in its release.
Bell joined GameStop, or rather, was appointed as the CFO of the company in June of 2019, which is I guess just a month or so before, based on the timeline, that-- you know, as far as we know, that Roaring Kitty, Keith Gill, began acquiring his stake in GameStop. The stock back then was trading in the single digits, $4, $5, $6 per share. As we just saw on the screen, GameStop right now trading in the mid 40s.
Now, that the company's CFO is stepping down is maybe not a huge surprise. Because one big thing, Brian Sozzi, did not happen or has not happened yet in the last few months, which is that GameStop has not come to market by issuing additional shares. The finance 101 textbook tells you that when you see your share price rise 5, 7, 8, in this case, 10x, you are supposed to come to market and issue shares to raise more capital with less dilution than would have been possible.
And I think that while raising capital, $480 per share probably wasn't reasonable. It's been 45-ish for a couple weeks now. And there's been radio silence, really, from the company.
BRIAN SOZZI: Well, Myles, I think my mom actually figured this one out. And let me just read this text I got from her at 6:47 AM this morning. Mr. Bill from GameStop is leaving next month. I guess things got too much for him. And I think that is part of the issue here. So thank you, mom, for that text really early this morning here.
To your point, yes, you should have came out if your GameStop CFO raised some form of capital and follow the playbook that the AMC team put out when things were really going crazy. They essentially saved their company. So kudos to AMC, not so good for GameStop. And the next shoe to drop here could effectively probably be the CEO, George Sherman.
George Sherman hired this CFO. And if you're reading the tea leaves, the reason why the CFO's likely departing is because Ryan Cohen is on the board. He got three of his board members put on there. He holds about a 13% stake in the company.
And this has all-- the writing really suggests it is Ryan Cohen running this company and making the decisions. So I wouldn't be surprised if George Sherman and his days are numbered leading the company.
JULIE HYMAN: The fact that your mother is texting you early in the morning about GameStop, it explains so much about you, Brian Sozzi.
BRIAN SOZZI: Yes, it does. Yes, it does.
JULIE HYMAN: I have new insight into the roots of Brian Sozzi. I would mention as well, there was some reporting by Bloomberg this morning that it might not only have had to do with the lack of fundraising and sort of striking while the iron was hot for GameStop. It might have also had to do with one of the Roaring Kitty fundamental theses behind this stock, which is that it should be turning more into an e-commerce play.
According to Bloomberg's reporting, Jim Bell was not on board as much with that vision, and that's part of the reason why he is resigning. Who knows if that's that's the case or if there was also this inability to or unwillingness, perhaps, to raise money in the market? But that's an interesting point as well, especially given, again, that that has been-- for the folks who have been longtime bulls, that that has been one of the core things that they have talked about and something that has not really materialized for GameStop.
MYLES UDLAND: Yeah, well, and I think, you know, as Brian outlined, it's an activist situation as well. And there's clearly tension between existing management and Ryan Cohen and his team. And we've already seen a couple of appointees join the business within the last month who have ties to Chewy and Ryan Cohen's previous endeavors. One imagines that those are not the last hires that will kind of come from that sphere of influence.
And to that point, Julie, if Jim Bell and George Sherman don't have a strong view on how to remake the e-commerce business, then their argument would be, why would I raise capital to have money that I do not know how to put to work? Which is, again, not really a great argument for you remaining as the CEO or CFO of a company when, again, your stock has gone up in value about 10x in the last year and you have not done a major capital raise.
Because again, that math means that you can raise the same amount of money you would have had to raise previously with 10% of the dilution in the existing shareholder base. So, you know, as Sozzi said, does not take a rocket scientist to figure out some of the challenges here. Though, again, as we discussed at the time, not credible to come out in the hundreds of dollars per share and raise capital.
I absolutely do not think that late January, first week of February, they had to come out and do something. But now that the dust has settled, you have to come out and do something more than nothing, even though, yes, their quarter's wrapping up, they have earnings coming up in a couple of weeks. You cannot just sit there and do nothing at a time like this.