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GameStop (NYSE:GME) said that its board of directors has granted a performance-based stock option award to Chief Executive Officer, Ryan Cohen, as part of the company’s strategy to achieve extraordinary growth. Under the conditions, the award will fully vest once the company’s market capitalization exceeds $100 billion and achieves around $10 billion in cumulative performance EBITDA. GameStop Growth Under Cohen Cohen is not guaranteed pay, salary, cash bonuses or stock under the award, with his compensation entirely at-risk. Since joining GameStop in January 2021, Cohen has overseen the company’s market capitalization grow to $9.3 billion, a 615% increase in stockholder value. The company’s total expenses since 2021 decreased from $1.7 billion to $950.8 million, representing a decline of over 44%. Meanwhile, the company has also managed to shift from a net loss of $381.3 million in fiscal 2021 to a net income of $421.8 million in the recent four fiscal quarters. Award Details The total award includes stock options to purchase around 171.5 million Class A shares at $20.66 per share. The first tranche will vest if GameStop achieves a market cap of $20 billion, with subsequent tranches requiring an additional $10 billion in market cap increase till meeting the $100 billion target. Concurrently, Mr. Cohen will be required to meet the company’s profitability targets, with the first tranche requiring a cumulative performance EBITDA of $2 billion. GameStop’s Cash, Liquidity and Balance Sheet The company reported cash and equivalents plus marketable securities of around $8.7 to $8.8 billion. Good liquidity showcases that the company has a potential to improve its market cap but it will all depend on where the management deploys the cash (acquisitions, paring down debt, investments, share buybacks etc.). Business Performance and Revenue GameStop has shifted strategically towards collectibles and digital channels, which have added to its revenue boost while physical store traffic has decreased in the face of store closures and various cost effectiveness measures. Can Cohen Meet GameStop Targets for a Big Payday? A market cap of $100 billion will make GameStop sit comfortably alongside the likes of Goldman Sachs or 3M. at its peak during the 2021 meme stock frenzy, the company’s market cap briefly sat round $25 billion. A $100 billion market cap and generating $10 billion in cumulative EBITDA will require a herculean effort. The company’s core business of video games and collectibles doesn’t support a valuation of this size without diversifying into other verticals – which is a double-edged sword. With the current business and market conditions, it is highly unlikely for Cohen to canter off into the sunset. While you're here, why don't you check out our take on Corsair's future outlook?

Tag: wallstreetbets

GameStop with a $100 Billion Moonshot: Can CEO Ryan Cohen Meet the Epic Stock Award Targets?