The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Jonathan Guilford
NEW YORK, Jan 8 (Reuters Breakingviews) - Finally, a form of imitation that befits GameStop GME.N. Since inaugurating the meme-stock phenomenon five years ago, the ostensible videogame retailer has been aping more successful companies. Its latest muse: Tesla TSLA.O. Like the automaker's boss, Elon Musk, CEO Ryan Cohen is being given an outlandishly lavish compensation plan. It’s a silly exercise, but if it makes sense anywhere, it’s here.
Cohen jumped from pushy shareholder to GameStop chieftain in 2023, when its astonishing ascendance was ebbing. He embraced the copycat lifestyle. Berkshire Hathaway BRKa.N, Warren Buffett's storied conglomerate, has a barebones investor relations website? GameStop now does, too. Strategy's MSTR.O stock price soared by hoarding cryptocurrency? Sounds like a plan.
Its latest gambit is patterned after the world's richest person. GameStop on Wednesday unveiled awards for Cohen in nine tranches, each of which unlocks by reaching set targets. At the top end, Cohen would receive options to buy nearly 172 million shares if GameStop hits a $100 billion market cap and generates $10 billion in cumulative EBITDA, for a $35 billion windfall, or about $24 billion after accounting for dilution.
The deal resembles Musk’s 12-part, $56 billion pay packet from 2018. A Delaware judge found it so comically vast she struck it down in 2024, but the decision was overturned just before Christmas. Tesla already relocated to Texas in protest and approved new awards of up to $1 trillion.
Cohen’s plan is proportionately similar to Musk's. And Tesla seven years ago, like GameStop now, faced a deeply unclear future. By contrast, however, despite Tesla suffering setbacks more recently, it reshaped the automotive industry and delivered years of profit. GameStop is unlikely to achieve anything similar; it's a retailer in a market that has moved beyond retail.
In the quarter before Cohen took the top job, GameStop recorded an adjusted EBITDA loss of $29 million. For the most recent three-month period, it swung to $64 million. It would take four years of such quarterly profit to achieve Cohen’s first milestone.
Aligning CEO pay with performance makes sense, but setting goals divorced from corporate reality doesn't convey confidence. It turns the whole exercise into a fanciful game that's meaningless for shareholders.
Tesla's absurdist ambitions rankle because of the company's alarming decline in a key part of the U.S. technological race. At GameStop, there's nothing concrete to analyze. Such antics may work at a company where absurdity is the point. As long as these sorts of packages don't become a boardroom meme.
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CONTEXT NEWS
Videogame retailer GameStop said on January 7 that it has granted a performance-based stock option award to CEO Ryan Cohen, which will give him the right to buy as many as about 172 million shares that unlock in nine tranches.
Each level requires both that GameStop’s market cap increase in $10 billion increments and that cumulative “performance EBITDA” rise in $1 billion steps, up to a maximum of $100 billion and $10 billion, respectively.
GameStop's Tesla-like CEO performance plan https://www.reuters.com/graphics/BRV-BRV/BRV-BRV/znvnqmndlpl/chart.png
(Editing by Jeffrey Goldfarb; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))
