Just five days after GameStop announced that top shareholder and activist investor Ryan Cohen had been nominated to become the embattled retailer’s new chairman, the Texas company’s C-suite massacre is reportedly now zeroing in on the final target, CEO George Sherman.
Although Sherman has only been on the job for two years and no official company confirmation has been made, multiple news reports citing several board members and an executive search firm suggest a change is underway that would mark a clean sweep of the executive team in less than two months.
If the CEO change is true, it will conclude a two-month total takeover by the 35-year-old billionaire co-founder of Chewy that has packed the board and executive leadership team with allies and handpicked candidates in just a matter of weeks, including a new chief technology officer, a new chief financial officer, a new chief operating officer and a new chief growth officer.
With the executive suite fully re-staffed, the operator of 5,000 video game retail locations has also moved to remake the board, announcing a slate of candidates last week that included Cohen allies Alan Attal and Jim Grube, who just joined the board alongside Cohen in January, as well as new board director nominee Larry Cheng, a managing partner at Volition Capital who is listed as the first investor in Chewy.
CEO Sherman was also on GameStop’s board nomination list but it remains to be seen if a change is made on that front too, given that GameStop shareholders won’t vote on the board picks until their annual meeting on June 9.
A $2 Billion Problem
To be sure, GameStop has been on a wild ride the past six months, with its stock price vaulting from $5 to as high as $483 amid a swirl of conflicting investor speculation that it was either going out of business or headed to the moon. So far, the latter group — including Cohen — is prevailing in that argument.
That said, there’s one increasingly conspicuous caveat that is starting to seep into the debate: GameStop is worth about $2 billion less today than it was just a week ago.
Although its current $10 billion market value is certainly still formidable and light years ahead of where it began its extreme makeover, each successive dip adds pressure on the new team to ensure that, in the words of CEO Sherman, GameStop becomes “a customer-obsessed technology company that delights gamers.”
As much as running the business and managing the expectations of shareholders are different jobs, for the retailer from Grapevine they are much more connected tasks. For example, the company’s recently announced plan to sell more shares at current market prices to take advantage of the meteoric move in its stock — but more so to give GameStop fresh liquidity to marshal its transformation — comes under increasing pressure with each ensuing downtick.
There’s also the reality that investors have a finite amount of patience and need to be constantly reassured that the multibillion dollar revaluation of the retailer is warranted and not about to evaporate as quickly as it materialized.
To do so, and to maintain investor and customer confidence that GameStop is actually different than it was six months ago rather than just restaffed, will require the company to do one thing; deliver unambiguous results.
Earlier this month, GameStop took a stab at that when it pre-announced that sales were up 11 percent two-thirds of the way through its current quarter.
But even on this front, the road ahead is fraught with ambiguity as the COVID-era store closures are starting to distort year-over-year sales comparisons and render them almost useless.
Whether or not George Sherman stays, goes or sticks around as a rank-and-file board member remains to be seen, but what is known is that the company has a lot of work to do to remake GameStop into the disruptive Chewy of video gamers.
Selected by EFXA