On Wednesday, GameStop Corp. announced the resignation of Matthew Furlong as CEO and the election of activist investor Ryan Cohen to the position of executive chairman, effective immediately.
A quick news announcement describing the action was followed by a 19% after-hours decline in shares of the meme stock and gaming store. This press announcement, which was issued just before the chain’s quarterly results, did not explain why Furlong had been fired.
Soon after the announcement, Cohen tweeted: “Not for long.”
In its quarterly earnings announcement, GameStop stated that it will not have a conference call to go through those numbers. However, the business claimed that Cohen’s leadership would be beneficial for shareholders in a document outlining those financials.
According to GameStop, the combination of these initiatives to strengthen and improve the core business, establish long-term profitability, and concentrate on capital allocation would help further free up long-term value creation for our investors.
Cohen, the co-founder and former CEO of the online pet supply shop Chewy Inc., joined the board that year and accrued a stake in the business before being elected board chairman of GameStop in 2021. The Wall Street Journal stated in 2021 that due to his influence at the firm, there were conflicts with management and a surge in popularity among meme traders, which helped raise GameStop’s stock.
GameStop announced on Wednesday as it works to reduce expenses and produce a consistent profit. As the gaming business grows more online and mobile, the company has increased its focus on physical locations under Cohen’s leadership after originally shifting more towards e-commerce.
According to a different document made available by GameStop on Wednesday, Cohen would be in charge of “capital allocation, assessing potential investments and acquisitions, and supervising the managers of the company’s holdings.”
In that filing, GameStop said that Furlong was fired without cause. Following the provisions of his offer letter from 2021, Furlong is entitled to any shares that would have vested in the subsequent six months but for his offer. Under the provisions of that letter, Furlong would have been eligible to receive approximately $2.5 million in shares in August. He will also receive a $100,000 base pay. Furlong’s resignation as a corporate director was also stated in the letter.
Furlong took over as GameStop’s CEO almost two years ago.
Additionally, GameStop announced that Mark Robinson has been named as its general manager and chief executive officer. According to the petition, Robinson has held several positions at GameStop since 2015 in addition to serving as vice president and general counsel for the business since January 2022.
GameStop added that the Strategic Planning and Capital Allocation Committee had been disbanded and Alain Attal had been named the board’s lead independent director.
GameStop’s net loss for the first quarter was $50.5 million, or 17 cents per share, significantly less than the same period last year when it was $157.9 million, or 52 cents per share. Net sales fell from $1.38 billion in the same quarter last year to $1.24 billion this quarter. GameStop had $1.06 billion in cash and cash equivalents at the end of the quarter.
Popular videogames like “Hogwarts Legacy” and “The Legend of Zelda: Tears of the Kingdom” should boost GameStop’s future sales. And to increase profitability, the firm has reduced costs.
Due in part to demand over the holiday season, the firm earned a profit in the previous quarter. However, until this year’s Christmas quarter, according to the two experts surveyed by FactSet, there won’t be another profitable quarter.
In a report published last week by Wedbush Analyst Michael Pachter, he mentioned that the store has greater difficulties due to “a shift towards digital, mobile, and subscription software (and away from the traditional packaged business).”
GameStop Short (Sell)
Enter At: 23.88
T.P_1: 21.69
T.P_2: 19.65
T.P_3: 17.61
T.P_4: 15.57
S.L: 30.04
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