GameStop was once the primary retailer for video games. It later became the quintessential “meme stock” in 2021, when a group of retail investors coordinating on Reddit disrupted hedge funds’ short positions, causing its share price to surge dramatically—an event that even inspired a film. Now, its unconventional leader, considered by some to be a visionary, has returned with a strategy he believes could match the frenzy of five years ago.
Despite recent market declines, CEO Ryan Cohen stated in an interview that his goal is to transform the $11 billion firm into a business worth over $100 billion through the acquisition of a publicly traded company. The billionaire sees the company expanding past its core sales of video games and collectibles.
“The outcome will ultimately be either brilliant or completely, utterly foolish,” Cohen told The Wall Street Journal.
As physical video games rapidly fall out of fashion, this ambition highlights the company’s push to update its model. The 2021 investor mania, which propelled the struggling retailer’s stock up 2,700%, was partly fueled by a widespread recognition that its business was becoming outdated. Still, Cohen is confident he can reshape that perception and attract a buyer willing to pay hundreds of billions.
GameStop did not promptly reply to a request for comment.
The specific target for this acquisition remains unknown. Cohen indicated to The Journal, however, that a suitable candidate would likely be in the consumer or retail sector. A powerful incentive drives the billionaire to complete such a deal. This month, the board of directors voted to boost Cohen’s compensation package to more than $35 billion, paid entirely in stock options—contingent on him raising the company’s market value to $100 billion and generating $10 billion in Cumulative Performance EBITDA. To date, Cohen has grown the market capitalization from $1.3 billion in 2021 to around $9.3 billion, a 615% gain for shareholders, though still well short of the $100 billion target.
What experts think is possible
Michael Pachter, a managing director of equity research at Wedbush Securities, expresses deep skepticism about Cohen’s chances of pulling off the acquisition. “The probability it reaches $100 billion might be slightly above 0.001%,” Pachter said. “But I’d bet against it. I’d say no, it’s not going to happen.” His skepticism stems from Cohen not having shown a concrete plan or distinctive edge beyond the company’s cash reserves, which stood at $8.83 billion last October.
The company has faced challenges updating its business in recent years due to several strategic errors. Last May, GameStop tried to attract cryptocurrency supporters by disclosing a purchase of 4,710 Bitcoins, then valued near $500 million, to counter declining profits. The news initially lifted the stock price, but shares fell 10% the following day. Then in June, Cohen announced on a quarterly investor call that the retailer would emphasize trading card sales, triggering a 20% drop in the stock.
“He operates in a business where the physical game model is under threat from digital downloads, and he’s essentially powerless,” Pachter remarked. “There’s nothing he can do to improve that situation.”
Cohen has experience with major acquisitions. He first gained prominence by founding the online pet food retailer Chewy, which was sold for $3.35 billion and later went public in 2019 valued at over $8 billion. Cohen has also been accumulating GameStop shares and is now its largest individual shareholder, with a stake exceeding 9%. Pachter, however, questions whether Cohen can repeat his earlier success.
“It’s easy to claim, ‘I’m going to be the next Warren Buffett,'” Pachter said. “But is Ryan Cohen someone who can catch lightning in a bottle twice? I’m not sure.”
The company’s stock recently received a lift after hedge fund investor Michael Burry, famed for his foresight in betting against the U.S. housing market before the 2008 crash, revealed he has been purchasing GameStop shares. Burry detailed his stake in a January 26 post, stating he is buying the stock as part of a long-term investment strategy.
“I believe in Ryan,” Burry wrote in the post, referring to Cohen. “I like the setup, the governance, the strategy as I see it. I am willing to hold long-term, and I am excited to see where this goes.”