GameStop's share price exploded to record highs in late January, spurred by a bizarre combination of Reddit, Elon Musk, and a YouTuber who calls himself Roaring Kitty. But it actually began to show signs of life well before that, in August 2020, when Chewy (that's an online pet store) co-founder Ryan Cohen purchased a nine percent stake in the company. That started a climb in the company's share price that continued when he increased his stake to nearly 13 percent a few months later.
Cohen also had a plan to turn the company around. GameStop was a "destination" shop for gamers of all stripes for years, but the rise of digital distribution had rendered it largely irrelevant, especially those of us on PC who enjoyed the early benefit of Steam. Cohen's idea, according to this Bloomberg report, is to give it a greater online presence, expand its offerings, and improve its turnaround time on shipping—essentially, to become a smaller-scale competitor to Amazon.
I don't know how likely it is to work, but on April 8 GameStop announced that Cohen was being made chairman of the company's board of directors. And less than two weeks later, CEO George Sherman is being shown the door.
"As disclosed in GameStop’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2021, the Board has been evaluating executive leadership to ensure the Company has the right skills to meet changing business requirements," the company said in a statement.
"The Company’s Form 10-K also noted that the Board has retained a third-party firm to support its efforts. The Board’s Strategic Planning and Capital Allocation Committee is leading a search to identify Chief Executive Officer candidates with the capabilities and experience to help accelerate the next phase of the Company’s transformation."
Sherman assumed the role of GameStop CEO in March 2019 but failed to turn its fortunes around in any meaningful way. Layoffs and store closures continued during his tenure—462 GameStop locations were shuttered in 2020 alone—and the share price continued to slide, from $11.75 on March 1, 2019, to $4.01 on July 31, 2020.
Reuters reported last week that Sherman has lost out on more than 587,000 shares in GameStop, originally granted in his April 2019 "inducement award agreement" and worth roughly $98 million at current prices, for failing to meet performance targets. Despite that, as noted by the Wall Street Journal, he will keep another roughly 1.12 million shares granted in the same agreement, currently worth in the neighborhood of $175 million. That value is a weird fluke, considering GameStop's share price was well under $10 when Sherman became CEO. If the GameStop stock was worth that much today, Sherman's shares would only be worth about $11 million.
“GameStop appreciates the valuable leadership that George has provided throughout his tenure. He took many decisive steps to stabilize the business during challenging times,” Cohen said. “The Company is much stronger today than when he joined. On a personal note, I also want to thank George for forming important partnerships with the new directors and executives who have joined GameStop in recent months."
The announcement of Sherman's departure pushed another spike in GameStop's share price, which surpassed $173 on April 19. It has since tailed off to the mid-$150 range. Sherman is expected to depart the company when a replacement is found, or on July 31, whichever comes first.