GameStop's CEO gets performance-based $3.5B bumper payout offer

GameStop, a U.S.-based gaming retailer, has announced giving its CEO, Ryan Cohen, performance-based stock options. The award will serve as an incentive to motivate the CEO to create long-term value for shareholders.

GameStop’s Board of Directors has issued a high-performance stock option to the company’s chairman and CEO, Ryan Cohen. The award consists of a package worth approximately $3.54 billion if Cohen can lead the company to a tenfold increase in market value and a significant boost in profits. 

Cohen will only receive the award if the company’s market capitalization grows to $100 billion. The company will also need to achieve $10 billion in cumulative performance earnings before interest, taxes, depreciation, and amortization (EBITDA).

Cohen’s compensation is tied to GameStop’s long-term performance

According to a press release, Mr. Cohen will not receive any guaranteed compensation, including salaries and cash bonuses. His compensation is contingent upon the company’s performance and the success of its operations. The press release detailed that the incentive ensures Cohen’s directives align with the company’s overall objective of creating “long-term value for GameStop’s stockholders.”

Cohen’s award includes stock options to purchase 171,537,327 shares of the company’s Class A common stock at a price of $20.66 per share. The award is structured in nine tranches that can only be vested if the company achieves its predetermined market cap and cumulative performance EBITDA hurdles.

Cohen’s vesting tranches and the required milestones. Source: GameStop

The first tranche vests only if the company’s market cap rises to $20 billion. The subsequent tranches will only be vested when the company adds $10 billion to its market cap until the goal of $100 billion is achieved.

Cohen must also ensure the gaming company meets its profit targets. The first tranche requires a cumulative performance EBITDA of $2.0 billion, while subsequent targets increase for each following tranche up to a cumulative amount of $10 billion.

Ryan Cohen joined GameStop in January 2021 when the company had a market cap of $1.3 billion. According to the publication, the CEO managed to lift the company’s current market cap to $9.3 billion, representing a 615% return to shareholders.

Cohen also oversaw a decrease in total selling, general, and administrative (SG&A) expenses to $950.8 million for the most recent trailing four fiscal quarters, down from $1.7 billion in fiscal year 2021. The figures represent a 44.4% reduction in expenses.

Cohen’s leadership turns GameStop profitable

In 2021, GameStop realized a net loss of $381.3 million. However, Cohen’s leadership has transformed the company into a net income of $421.8 million for the most recent trailing four fiscal quarters.

Cohen and the GameStop board reached a consensus on January 6. However, the proposal will now be presented to the company’s shareholders, who will need to approve it before its implementation. GameStop is expected to hold a special meeting in March or April this year to vote on the proposal.

GameStop’s YTD performance. Source: Google Finance

Data from Google Finance shows that GameStop is up 4.15% today, following a 5% surge in the premarket, and is trading at $20.66 per share at the time of this publication. The company’s stock price is still down 7.77% in the last month, but has managed to achieve a 6.27% increase YTD.

The news comes after the company’s stock fell in mid-December following a drop in the value of its Bitcoin holdings. Cryptopolitan reported that the company lost $9.2 million from Bitcoin’s correction at the time, causing its stock to fall by 5%.

According to data from Bitcoin Treasuries, GameStop claims the 23rd position among public companies with the largest Bitcoin holdings. The data shows that the gaming retailer holds 4,710 Bitcoin in its books, valued at $431.91 million at current BTC prices.

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