Departing GameStop Executives Eyeing Lottery-Winning Paydays

July 31 can’t come soon enough for several GameStop executives, including CEO George Sherman, who are slated to exit the video game retailer at that time in a management reorganization driven by incoming chairman of the board Ryan Cohen, co-founder/CEO of online pet supply service Chewy.com.

Sherman, CFO James Bell, chief customer officer Frank Hamlin, and chief merchandising officer Chris Homeister all have provisions in their contracts that call for expedited vesting of stock options, Wall Street-based restricted shares that can drive executive compensation into the stratosphere — with no tax liability for the company.

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For example, Netflix co-founder/co-CEO Reed Hastings exercised more than 1.33 million stock options in 2020 worth more than $612 million — taxes on which Hastings, not Netflix, is responsible for.

For Sherman & Co., the payday won’t be as large, but still significant considering they are being forced out at a time when GameStop shares are trading at atypical highs due in part to a third-party turf war between individual investors and established hedge funds.

Sherman, who through the middle of the month was the largest individual shareholder, inexplicably agreed to give up $47 million in stock options and $5 million in cash as part of a severance agreement that will enable him to exercise 1.1 million in stock options worth $169 million at market close on April 23.

Bell and Homeister each have restricted shares worth $43.6 million, while Hamlin’s stock options are worth $33.5 million on paper. All three executives reportedly could receive even more as a result of performance-based clauses in their employment contracts — performance that had little to do with their management, and much more to do with market manipulation and Wall Street politics.

GameStop shares traded at $19 per share at the end of 2020. But when Cohen — reportedly a darling among individual investors — began buying shares, online trading forums on Reddit caused a crowdsourcing of sorts among followers that saw the retailer’s shares reach of peak of $483 per share in late January. In the process, some hedge funds nearly went bankrupt betting the stock would decline, or short.

“In fairness, George may have asked for this,” said Wedbush Securities media analyst Michael Pachter. “He lost all of his hand-picked executive lieutenants [with Cohen’s arrival].”

Regardless, GameStop shares opened April 26 down at $149 per share. Bank of America values the stock at $10 per share. For Sherman & Co., the next 90+ days could be maddening.

GameStop Reportedly Shutting Down Nordic Stores

Fiscally challenged GameStop is reportedly set to begin closing upwards of 300 stores in Scandinavia in 2020.

The closures have not been officially announced, but store managers in the region confirmed the move, according to Computer Sweden. In addition, an annual management conference was reportedly canceled.

The move comes as the world’s largest video game retailer contends with ongoing consumer migration toward online gaming and console manufacturers delay new product launches until late next year.

GameStop posted a net loss of more than $400 million — or $32 million when excluding impairment charges, in its most-recent fiscal period. Revenue fell more than 14% to $1.28 billion from more than $1.5 billion during the previous-year period.

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“We are on track to close between 180 and 200 underperforming stores globally by the end of this fiscal year,” GameStop CFO Jim Bell said on the September fiscal call. The chain operates more than 5,700 stores globally. Bell said the closures marked the beginning of ongoing re-evaluation across all company operating units.

“We are applying a more definitive, analytic approach, including profit levels and sales transferability, that we expect will yield a much larger tranche of closures over the coming 12 to 24 months,” he said.

GameStop to Close 200 Underperforming Stores, With More to Follow

Following a nightmarish fiscal quarter, GameStop said it plans to shutter upwards of 200 underperforming stores nationwide, with more closures to follow.

CFO James Bell disclosed the move during the retailer’s Sept. 10 fiscal call that followed a second quarter (ended Aug. 3) that saw the company post a net loss of more than $400 million — or $32 million when excluding impairment charges.

Regardless, revenue for the world’s largest video game retailer fell more than 14% to $1.28 billion from more than $1.5 billion during the previous-year period.

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“While these [store] closures were more opportunistic, we are applying a more definitive, analytic approach, including profit levels and sales transferability, that we expect will yield a much larger tranche of closures over the coming 12 to 24 months,” Bell said.

At its peak, GameStop operated 9,000 stores worldwide. It now operates more than 5,700 across 14 countries.

GameStop continues to be undermined by changing consumer habits, which include moves toward subscription-based online gaming instead of disc-based consoles.

Major manufacturers Sony and Microsoft have plans to role out new consoles in 2020 that still include disc drives.