By Svea Herbst-Bayliss, Noel Randewich and Eva Mathews
(Reuters) -GameStop named Amazon’s Australian business director (NASDAQ 🙂 as its CEO on Wednesday and said the struggling video game retailer may sell new shares, sending its volatile shares down 7% in trading spread and disappoint some of their ardent fan base of individual investors.
In a quarterly report that was stronger than analysts predicted, GameStop (NYSE 🙂 said it could sell up to 5 million new shares, which would be worth $ 1.4 billion based on its latest share price.
Matt Furlong, a nine-year Amazon veteran, will succeed George Sherman as CEO. GameStop said Mike Recupero, who spent more than 17 years at Amazon, will succeed Jim Bell as CFO.
Furlong will join on June 21, while Recupero, who was the chief financial officer for Amazon’s North American consumer business, will join on July 12, the company said.
Shares of GameStop have nearly doubled in the last month, approaching their peak in January. That’s when a massive investor-driven surge on Reddit’s wallstreetbets trading forum made the stock the most traded on the US market for several days.
The Securities and Exchange Commission requested documents and information related to an investigation into that trade, GameStop revealed, along with the trading of shares in other companies.
AMC Entertainment (NYSE :), Blackberry (TSX :), Clover Health Investments and other so-called “meme” stocks on the recent rise fell more than 4% in extended trading on Wednesday.
Even after falling late on Wednesday, GameStop shares rose more than 1,300% in 2021.
Previously, shareholders elected billionaire investor Ryan Cohen, the company’s largest shareholder and co-founder of online pet supplies retailer Chewy (NYSE :), as its chairman. GameStop announced its nomination in April. He warned shareholders of increased volatility in the future.
“As my dad would say, buckle up,” Cohen said.
Taking advantage of the recent increase in GameStop’s share price, Wednesday’s announcement of a possible share sale follows the issuance of 3.5 million shares in April, which raised about $ 550 million.
Some on the wallstreetbets forum were disappointed with GameStop’s latest stock sale plan.
“Guys, why didn’t Cohen and his NEW CFO go to the fucking bank and get a 2-3% loan to fund their new plans?” Posted a commenter on the site.
Furlong oversaw a small but growing part of Amazon’s business as head of country for Australia, a role his LinkedIn profile said he took on in May 2019. Under Furlong, net sales for the unit that operates the e-commerce site Amazon sales in Australia roughly doubled in 2020 to A $ 1.12 billion ($ 867 million) a year earlier, according to a securities presentation.
“These appointments reflect the Board’s renewed focus on building a technology company and News Block in growth,” GameStop said in the statement.
While the recent launch of new video game consoles is likely to benefit GameStop, analysts have warned that its share price has been disconnected from the company’s day-to-day business. At least two Wall Street analysts recently dropped coverage of the company.
SHRINK OF BASIC BUSINESS
Video games are a massive industry that rivals Hollywood in some measures, but GameStop’s core business of selling new and used video game discs is shrinking as consumers switch to downloading games digitally or streamed. The company has lost money for the last three years.
Cohen hopes to turn GameStop into an e-commerce business that can compete with large retailers. He told shareholders at Wednesday’s meeting in Grapevine, Texas that they had “used in a whole new era at GameStop,” but declined to provide a detailed plan.
He has said the changes to GameStop should speak for themselves, including hiring new hires from Amazon, Google (NASDAQ 🙂 and Chewy.
GameStop said its net sales for the quarter ended May 1 increased 25% to $ 1.28 billion, beating the average analyst estimate of $ 1.16 billion, according to Refinitiv data.
Its adjusted loss per share was 45 cents, beating expectations for a loss of 84 cents per share.
In a brief conference call, Sherman provided a summary of GameStop’s quarterly results and did not respond to analyst questions as companies normally do.