- GameStop stock jumped as much as 17% in premarket trading on Tuesday.
- Activist investor Ryan Cohen wrangled three board seats earlier this month.
- The Chewy cofounder’s RC Ventures has built a 13% stake in the video-game retailer.
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GameStop shares spiked as much as 17% in premarket trading on Tuesday, as investors threw their support behind activist investor Ryan Cohen to drive changes at the struggling video-game retailer.
The Chewy cofounder’s RC Ventures struck a deal with GameStop earlier this month to add three seats to its board of directors, including one for Cohen. GameStop will shrink its board from 14 seats to nine seats at its annual meeting this year.
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The agreement sent GameStop shares up as much as 93% last Wednesday. They have soared more than seven-fold since August, from less than $5 to more than $35.
The stock rally was sparked by Cohen disclosing a sizeable stake in GameStop last August. The billionaire investor and his team grew that position to just over 9 million shares by mid-December, giving them a roughly 13% stake in the company. Their deal with GameStop allows them to build their stake as high as 19.9% in the coming months.
Cohen and his partners also wrote a letter to GameStop’s directors in November, criticizing them for not adapting to industry trends such as digital streaming, mobile gaming, and the loss of sales to big-box and online retailers.
They called for the company to evolve from a bricks-and-mortar retailer into a technology company, narrow its focus on profitable sites, and build out an e-commerce ecosystem.
GameStop has certainly seen the value of online selling during the pandemic. Its e-commerce sales surged 309% to account for 34% of its total sales in the nine weeks to January 2. However, its net sales slid 3.1% to $1.8 billion as booming demand for next-generation consoles was offset by supply constraints and store closures.