Gamestop sinks over SEC investigation, shakeup in C-Suite

Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland discuss Gamestops c-suite remake, how the stock is faring, and the action overall in the meme stock frenzy.

Video Transcript

MYLES UDLAND: All right, let's move now to our biggest stock story we have been following for the last three weeks. That, of course, the resumption of the meme trade. But GameStop out last night. Of course, GameStop really the grand poobah here among these meme names. It was out with its latest quarterly results.

And really, the biggest news is that they finally announced that they will have a new CEO. We see the results here beating on the top line about $1.3 billion in revenue during the most recent quarter. So GameStop certainly on track or on an annualized basis. Looking at revenues, north of $5 billion for the year, with the holiday quarter weighting, likely to do quite a bit better than that.

Losses less than expected, more narrow than expected. But the company announcing that Matt Furlong will be its new CEO. He joins the company from Amazon. GameStop also announcing that Mike Recupero will be its next CFO. He also joins the company from Amazon. And so we see GameStop here overhauling its C-suite.

They also announced, Julie, that they are having a $5 million at the market offering, doesn't mean that they have to offer that right now. But finally, seeing GameStop be a little bit more aggressive in coming to market to use the value of its currency, which of course, is its share price, which even with an 8% decline today trading at $280 per share. And we remind viewers once again that about a year ago, this was a $4 stock.

JULIE HYMAN: Yes, indeed, it was a $4 stock and it's made a lot of money for a lot of people. As I was looking through the results here, and not just the results, but the commentary from Ryan Cohen, I kept thinking about Keith Gill a.k.a. Roaring Kitty, who was one of the first people to publicly pound the table on this stock as we know. He became quite famous for doing so later. But initially, there weren't too many other people following him.

And we tend to, sort of, pooh pooh the fundamental case on many of these meme stocks because they haven't mattered. But his case was originally a fundamental case. And so I just wonder what he thinks now. And, of course, he's a very rich man as a result of GameStop. But I do have to wonder what he thinks of the fundamental path of this company at this point.

And I say that because Ryan Cohen at the shareholder meeting yesterday said, we have a lot of work in front of us. Moving forward, we want you to judge GameStop based on our actions not our words. And he also said, we won't give you a detailed plan. You won't find us talking a big game making a bunch of lofty promises or telegraphing our strategy to the competition.

OK, but so what are the actions besides this share filing? You've hired new people, but at some point, you do have to make a plan. If you're not going to tell anybody, I don't know exactly how that works. And when is it going to bear fruit? So I don't know. I think yeah, sure, it doesn't matter what the fundamentals are at this point, except that it does a little bit because the stock is down today. And I think at some point they are going to have to tell people what they plan to do for the company.

BRIAN SOZZI: Yeah, I think the immediate plan might just be to use all the cash that they have raised to close hundreds of these stores and maybe invite Mario and Luigi into the stores when key games launch. Get people excited to come in there.

But I just want to say too the sad state of that conference call last night. It was actually pretty laughable, an 11-minute earnings call by an outgoing CEO, no question and answer session with analysts. The poor guy, and this is the outgoing CEO George Sherman, and I'm sending him a virtual hug this morning, 11 minutes on a conference call. He had to congratulate the new guy that is coming in to take his job in a couple of weeks, also congratulate the new CFO coming into a job he will no longer hold. He thanked shareholders at the end, and he did the peace out sign. There has to be a top--

JULIE HYMAN: Sozzi, he doesn't need your hug. He's getting a payout.

BRIAN SOZZI: He's getting a payout but still I want to send it to him because he is. We've joked a little bit about what he has done at GameStop over the past two years or so. But this is still an accomplished executive who likely didn't want to go out like this, so to stick them on a conference call for 11 minutes is pretty absurd. In all actuality, it should have been Ryan Cohen on that call. Man up, get on that call, say something, and leave George Sherman. Just put him out to pasture, let him go do his thing and join a board somewhere.

MYLES UDLAND: Well, look, I think the challenge for GameStop here, which is different than AMC, is that their management has not been aligned through this process. Now, in it's 10-Q, GameStop did disclose that they received an SEC request for documents basically related to that period. What's the exact language here? A request from staff for voluntary production documents and information concerning an SEC investigation into the trading activity in our securities and securities of other companies.

So this is basically the SEC looking at the entire meme trade of which GameStop is a part not really specific to GameStop shares. But to that point about George Sherman leaving and him not really taking questions from analysts, again, with an activist in this name, and that story goes back to the end of last year when GameStop was trading in the teens and the 20s and the stock was still up 5x from where it had been just a few months prior. It was a nutty story at the end of 2020 way before we got into any of this.

And I think that tension between what are we going to do? What is the George Sherman management team going to do, and how are they going to deal with these activists? I think is a story that never really got resolved while the stock went and quintupled and quadrupled and did whatever it did what's it up, 1,600% this year, whatever our shorts said. It's just, kind of, eye popping numbers.

And I think, look, as a look behind the curtain here, we are doing a meme special on this show tomorrow. And there are really no analysts that want to talk to us about GameStop because it's not really a stock that you can look at and discuss fundamentally in a serious way, because remember Keith Gill, the most bullish optimistic GameStop believer going back in time. And he's not alone in this, let's call it, the WallStreetBets view of the company.

They were looking at it as a company that could go or a stock that could go into the 20s, 30s, maybe the 40s. That has those guys up 10x from their initial investment. So I think that there's a credible fundamental case for the business improving dramatically. But even the most ardent believers were discussing that $250 per share ago.

So there's really nothing else to add at this point, Julie. So I take your point that there's no fundamental case. I mean, there is one, it's hard to find it in the mess of what we've been looking at in the last couple of months.

JULIE HYMAN: Yeah, and the mess also to Sozzi's point has to do with the management, and to your point, that they're not aligned. And I just want to close out given your comment that analysts don't want to talk about this company.

I was struck by the commentary in a note from the analysts at Baird who cover the stock, Colin Sebastian and Dalton Kern. And they wrote a note, "Investors deserve more than memes to value a company's fundamental long-term prospects." And I think that sums up their attitude, analysts' attitudes probably in general about this thing.

MYLES UDLAND: Yeah, and I think that's why they'll put in a note to their clients. And as members of the media, we often get access to that stuff. But nothing more to say is probably the real attitude there. Maybe if you get them on the phone or over a beer or something, they'll talk through kind of how they're thinking about it. But they certainly don't want to come on the record in public and have to discuss that name at any more length than they're already required to.

But again, as you mentioned, 10 o'clock hour tomorrow, we're going to be full meme special just covering the whole trade, talk about some of these names, talk about the short interest side of it. Brian Cheung is going to walk us through some of the details of stock issuance, which has been a big hot part of this topic. So again, 10 o'clock Eastern tomorrow here on Yahoo Finance, a full meme trade special.