TLDR
- GameStop CEO Ryan Cohen seeks a transformative acquisition in consumer or retail sectors using $9 billion cash reserves
- Cohen’s compensation package could reach $35 billion if he grows GameStop’s market cap to $100 billion
- Michael Burry re-entered GameStop as shareholder, drawing parallels between Cohen and Warren Buffett
- Shares climbed 4.5% following Wall Street Journal report on acquisition strategy
- Cohen owns 9% of shares with potential options on 171.5 million more tied to performance targets
Ryan Cohen is steering GameStop toward its most ambitious chapter yet. The CEO revealed plans to pursue a major acquisition that would reshape the company into a $100 billion powerhouse.
The Wall Street Journal reported Cohen’s focus on consumer and retail sector targets. He’s betting the company’s $9 billion cash pile on finding the right opportunity.
Cohen didn’t sugarcoat the stakes. “It’s ultimately either going to be genius or totally, totally foolish,” he told the Journal about his transformation plan.
His personal fortune hangs in the balance. Cohen could pocket $35 billion if he successfully reaches the market cap milestone.
GameStop shares responded positively to the news. The stock gained roughly 4.5% in Friday trading as investors digested the acquisition strategy.
Burry’s Bullish Berkshire Bet
Michael Burry has placed a contrarian bet on GameStop again. The “Big Short” investor isn’t buying the retail business though.
Burry sees Cohen as a potential Warren Buffett figure. He believes GameStop could mirror Berkshire Hathaway’s evolution from struggling manufacturer to investment powerhouse.
Burry’s newsletter laid out his thesis bluntly. Cohen is “milking” a declining business while accumulating cash for the right acquisition target.
“He has a crappy business, and he is milking it best he can while taking advantage of the meme stock phenomenon to raise cash,” Burry explained. The strategy has delivered $9 billion in firepower for deals.
Cohen praised Burry’s track record in return. “He’s one of the few investors I respect,” Cohen said regarding the investor’s support.
The CEO rejected the meme stock narrative entirely. He maintains his strategy centers on fundamental long-term value creation.
The Road to $100 Billion
Cohen’s compensation structure resembles other moonshot executive packages. Tesla shareholders recently approved similar high-reward terms for Elon Musk.
Cohen currently holds about 42.1 million GameStop shares. That stake represents approximately 9% of the company.
Performance-based options could grant him over 171.5 million additional shares. Meeting specific market cap benchmarks triggers these options.
Since January 2021, Cohen has outperformed the S&P 500 with GameStop. He’s pivoted the business toward digital commerce and alternative investments.
The company has dabbled in collectibles and Bitcoin. However, these remain relatively small moves compared to Cohen’s bigger vision.
Cohen is hunting for targets with underperforming management. The $9 billion war chest gives him flexibility to wait for ideal opportunities.
Warren Buffett famously transformed Berkshire Hathaway starting in 1962. He acquired struggling businesses and turned them into profitable ventures through strategic investments.
Cohen hasn’t yet executed acquisitions matching Buffett’s American Express or Coca-Cola deals. His investment track record outside GameStop remains largely untested.
Burry noted Cohen is biding time with the declining core business. The real test comes when he deploys capital on a major acquisition.
Cohen’s ability to identify and execute transformative deals will determine success. The next few quarters should reveal whether his Berkshire-style vision materializes.
