One of GameStop‘s largest stockholders sent a letter to the board of directors on November 16, calling for a “strategic review of the business,” and asking for a clear plan for evolving the brand. Ryan Cohen sent the letter on behalf of his venture capital firm, RC Ventures, which owns a substantial 9.8% share in GameStop. The letter implores the company to maximize stockholder value by taking advantage of the growing video game industry.
Cohen wrote the letter after feeling that RC Ventures attempts to engage the board of directors the last few months have proven ineffectual. In the letter he stated that his company realizes that the board may feel protected from scrutiny because stock price has seen a recent uptick, however, Cohen believes that is due to RC Ventures filing its 13D, not because GameStop itself has evolved.
In the letter, Cohen states he would like to see GameStop focus on becoming a “technology company” that offers customers digital services and products, rather than continue to prioritize its brick-and-mortar stores. According to RC Ventures research, the global gaming market is expected to be a $174.9 billion dollar industry this year, and reach $217.9 billion by year 2023. Cohen goes on to state that GameStop has valuable assets including a large customer base and a strong brand. He believes the company can emerge as the market leader over other forward thinking companies if it will create a strategy to create opportunities for growth.
In spite of the global gaming market growing by more than 2.5 times since the last console cycle, GameStop continues to lose billions of dollars. According to Cohen, stockholders have seen their equity decline by almost 68% over the last 3 years, and nearly 85% over the last 5 years. Sales have dipped from $9.5 billion in fiscal year 2011 to only $6.4 billion in 2019. Net income has dropped from $839 million in 2011 to a loss of $470 million in 2019. During the last two quarters alone GameStop has lost $277 billion dollars. Cohen noted that the companies e-commerce sales have increased during the pandemic, however, it is not an excuse to be complacent.
Cohen calls on GameStop to identify and forgo lease renewals on underperforming and duplicate stores. He also stated that non-core operations in Australia and Europe should be merged or sold in order to reduce losses and potentially increase cash flow. He noted that the Australian market has shown signs of life, but not enough to make up for the losses from the stores across Europe. He concluded the letter by reiterating that RC Ventures is not looking to have a seat on GameStop’s board, the company just wants GameStop’s leaders to do their jobs.
It is unclear if Cohen’s letter will have an impact on the future plans for the company, however, it is important to note that GameStop has made a few moves in the right direction this year. The company is set to close more than 400 stores, and announced a partnership with Microsoft which gives GameStop a lifetime cut of of revenue from all Xbox All Access Subscriptions.
Source: Wall Street Journal
![\"IT電腦補習](\"http://itteacheritfreelance.hk/test/wordpress/wp-content/uploads/2016/05/logo2-2.png\"){kind=logo}
www.itsec.hk
www.itsec.vip
www.itseceu.uk
Leave a Reply