GameStop Proposes $35 Billion Pay Package for CEO Ryan Cohen

GameStop has announced a substantial compensation package valued at approximately $35 billion for its CEO, Ryan Cohen. This unprecedented pay structure is contingent upon Cohen successfully enhancing the video game retailer’s market value and profitability. Specifically, he must increase the company’s market capitalization to $100 billion and achieve $10 billion in cumulative performance EBITDA (earnings before interest, taxes, depreciation, and amortization).

The company’s shift towards this ambitious compensation plan comes at a challenging time. GameStop has experienced a decline in revenue, with annual earnings dropping more than 35% since 2022. Furthermore, its stock price has plummeted by 80% from the all-time highs reached during the pandemic’s meme-stock frenzy in 2021. Currently, GameStop’s market capitalization stands at $9.26 billion, significantly down from its peak of approximately $34 billion.

Targeted Goals and Structure of the Pay Package

Cohen’s pay package is structured similarly to the incentive plan established for Elon Musk at Tesla. Under this model, his compensation is entirely dependent on stock options that only vest upon meeting stringent market value and operational profit targets. GameStop’s proposal details that Cohen will not receive any guaranteed salary, cash bonuses, or stock options under this plan.

Instead, the package comprises stock options that allow him to purchase more than 171.5 million shares at a price of $20.66 per share. According to calculations by Reuters, the total value of this award could approach $35 billion, excluding an exercise cost of approximately $3.5 billion. This significant jump in valuation would also enhance Cohen’s financial stake in the company, as he currently holds an 8.3% share, making him GameStop’s second-largest shareholder.

Cohen, who joined the GameStop board in January 2021 and took on the CEO role in September 2023, has been pivotal in steering the company back to profitability. His strategies have included aggressive cost-cutting measures, such as closing hundreds of stores.

Approval Process and Future Outlook

GameStop’s board has reached an agreement on this compensation package, which will require shareholder approval at a special meeting anticipated to occur in March or April 2024. If the targets are achieved, the combination of increased compensation and Cohen’s ownership stake could significantly reshape the company’s landscape.

Following the announcement of the pay package, GameStop’s shares experienced an uptick of more than 4% in early trading, making it the second most-trended stock on Stocktwits, a platform favored by individual investors. As GameStop seeks to revitalize its business and adapt to the evolving gaming landscape, the success of this plan will be closely monitored by investors and industry observers alike.