GameStop Company Turnaround

Since 2021, GameStop has been undergoing a transformation: fewer stores, higher value, renewed profitability

By June 2021, Ryan Cohen and the new board of directors were in the position to initiate the turnaround of the company. This has involved extensive cutting of costs, closing of stores, and modernization of a company that had previously failed to adapt with the modern era.

"We inherited a bunch of legacy everything, and under-investment across the entire business –- people, the entire technology stack, just decades of neglect, and so it’s hard to turn around a brick and mortar retailer that’s under the kind of pressure that GameStop was and continues to be under, but that was also part of the attraction going into GameStop was that a transformation the likes of GameStop was really unprecedented and I was motivated by that." -- Ryan Cohen (November 2022)

GameStop has made substantial efforts to upgrade and modernize its online store and enhance its overall omnichannel experience. This has included investing in a more user-friendly and mobile-responsive website, streamlining the checkout process, and improving product availability and search functionality. Additionally, the company has integrated buy-online-pickup-in-store and same-day delivery options.

In September 2023, Ryan Cohen became the CEO of the company. In December 2023, the board approved a new investment policy which gave Ryan Cohen the authority to manage the company's investment portfolio.

In March 2024, the company reported full-year profitability for the first time in 6 years.

In 2024, the company completed 3 at-the-market equity offering programs, raising approximately $3.5 billion in cash, raising the book value per share of GME to nearly $11.

"with respect to retail operations, we plan to continue reducing costs and focusing on profitability... This means a smaller network of stores with an expanded assortment of higher value items that fit into our trade-in model." -- Ryan Cohen, 2024 annual shareholder meeting (June 17, 2024 )

In 2024, GameStop began selling new original products such as Candy con controllers and the Raptor 8 mobile gaming controller.

In addition to the release of new original products, GameStop has also expanded into the graded trading card market.

• On October 15, 2024, GameStop announced a collaboration with PSA, becoming an authorized PSA dealer, with PSA providing authentication and grading services for trading cards through select GameStop stores across the United States.
• On November 18, 2024, GameStop announced that Nat Turner, Chairman and CEO of Collectors Holdings, Inc., has been appointed to the Company’s Board of Directors.

The turnaround of GameStop has been in progress for about 3 and a half years, depending on when the precise start point is.

A look at the core financial metrics shows significant improvements to the financial standing of the company.

GameStop has raised cash and eliminated practically all of the debt that it had. Now holding a large pile of cash, the company earns interest income rather than paying interest on debts.

GameStop continues to close more stores every year, a trend that began before the initiation of the company turnaround. As GameStop closes more stores, the revenue continues to decrease, as does the SG&A expenses.

While operating income has seen significant improvement, it remains negative.

comprehensive article with links

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Institutional ownership increased from 87.4 M shares as of June 13 to 97.6 M shares as of June 30

Ownership pie chart

Ownership table

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On May 17 GameStop announced plans to sell up to 45 million shares, and on May 24th they announced that all 45 million shares were sold for $933 million, at an average price of about $20.73.

Modifying shares outstanding from 306 million to 351 million is an approximately 15% dilution. A shareholder could have expected the value of their own share holdings to have dropped 15% from this action, but shareholder value hardly went down at all as a consequence of the dilution and in fact is up about 75% from May 1 to May 24.

source: gmetimeline.org/ownership

image source

"Held at" DTC versus Computershare

As of March 20, 2024 there were 305,873,200 shares of GameStop's Class A common stock (GME) outstanding.

"Of those outstanding shares, approximately 230.6 million were held by Cede & Co on behalf of the Depository Trust & Clearing Corporation (or approximately 75% of our outstanding shares) and approximately 75.3 million shares of our Class A common stock were held by registered holders with our transfer agent (or approximately 25% of our outstanding shares)."

• 25% of issued shares of GME are owned by directly registered shareholders

• The other 75% is held by Cede & Co on behalf of the DTCC

As of May 24, 2024, GameStop completed an at the market equity offering, and sold 45,000,000 shares, increasing the total amount of shares outstanding to approximately 351,000,000.

DRS vs DSPP

Information about DRS versus DSPP counts held at Computershare are not reported publicly.

This information is available, however, on the GameStop stockholder list which can be viewed in person at GameStop headquarters.

The latest data we have was from 2023 when GME shareholders viewed the stockholder list and obtained some data including DRS vs DSPP counts. Source: https://www.drsgme.org/2023-stock-list-viewing

The DRS vs DSPP numbers in the graphic have been rounded for simplicity based off the data from that 2023 source.

Of shares held by Computershare: 53 million DRS, 22 million DSPP.

May 24, 2024

GRAPEVINE, Texas, May 24, 2024 (GLOBE NEWSWIRE) -- GameStop Corp. (NYSE: GME) (“GameStop” or the “Company”) today announced that it has completed its previously disclosed “at-the-market” equity offering program (the “ATM Program”).

GameStop disclosed on May 17, 2024 that it filed a prospectus supplement with the U.S Securities and Exchange Commission to offer and sell up to a maximum amount of 45,000,000 shares of its common stock from time to time through the ATM Program. The Company sold the maximum number of shares registered under the ATM Program for aggregate gross proceeds (before commissions and offering expenses) of approximately $933.4 million.

GameStop intends to use the net proceeds from the ATM Program for general corporate purposes, which may include acquisitions and investments.

Noticed this post on reddit, decided to give this >40 minute documentary a watch.

A review of GAMESTOP to the MOON - How Reddit almost triggered an Economic Crisis | FD Finance

★★☆☆☆

2/5, would not recommend.

TLDR: documentary focuses primarily on the events of late 2020 and early 2021, conflates AMC and GME as equivalent things, concludes with the insinuation that all AMC, GME, and NFT investors are losers that have lost almost everything

• Title of the documentary does not match the content of the documentary. A more appropriate title might have been "the story of Reddit day traders pumping AMC and GME." That is what this documentary was about.
• paints most of these investors as either foolish day traders or naive investors, uses words like "gambling", "casino"
• lots of FUD sentiment throughout
• a few of these investors made a lots of money while most investors were losers
• 32:04 "GameStop led the way. And, as a group, the totality of the group picked AMC next.
  And, it wasn't like somebody said oh man we're all gonna go over to AMC, it's just kind of you know, that's where the flow goes, that's where the chatter goes, and AMC was the next stock."
• for some reason, out of nowhere, in the final 5 minutes the documentary suddenly starts talking about NFTs and makes them out to be pointless. Doesn't mention GameStop's relationship with NFTs but in stead focuses on how NFTs were a speculative bubble with foolish investors, just like with AMC and GME.

Total waste of time. I don't know who the intended audience was for this, but this is just more pointless narrating about the lives of people that experienced events that happened 3 years ago, concluding that the story is over and all those people that didn't get out with gains are losers that are never going to win.

It's as if the media like this is stuck in the year 2021. Reddit. Wallstreetbets. AMC. GameStop. Day traders. Robinhood. Down 90% since peak. The end.

data source: GameStop 10-K filings - Google Sheets document

Here is another representation of GameStop's FY23 income statement, this time showing clearly that GameStop had an operating loss of $34.5 M ( compared with an operating loss of $311 M FY22 !)

If not for the $49.5 M from interest income, GameStop would not have had positive net earnings in FY23.

Operating loss of $35 M (compared with operating loss of $312 M in FY22)

Small but notable net earnings of $6.7 M (compared with net loss of $313 M in FY22)

How did GameStop make $50 million in interest income?