GameStop announced on Wednesday a compensation package for its CEO Ryan Cohen valued at approximately $35 billion, the full payout of which is contingent upon the company's successful transformation. Cohen is tasked with increasing the market capitalization of the struggling video game retailer by more than tenfold and substantially boosting its profits.
Achieving these goals will require a significant strategic pivot for GameStop. In recent years, as gamers have shifted to online consumption, the brick-and-mortar retailer has lost billions in revenue.
Since 2022, the company's annual revenue has plummeted by more than 35%; its stock price has fallen 80% from its 2021 peak. During the 2021 "meme stock" frenzy amid the pandemic, GameStop was a darling among retail investors.
This new compensation package sets an exceptionally high performance bar for Cohen: he must elevate the company's market capitalization to $100 billion and achieve a cumulative EBITDA of $10 billion.
GameStop stated that the package includes no fixed compensation, meaning Cohen will receive no base salary, cash bonuses, or stock options. GameStop's current market capitalization is $9.26 billion, a figure far below its historic high of approximately $34 billion reached during the 2021 meme stock mania.
In early trading on Wednesday, GameStop's stock rose more than 4%. On Stocktwits, a popular social investing platform among retail investors, the stock was the second most-discussed ticker.
The design of this compensation package mirrors the decade-long incentive plan approved for Elon Musk at Tesla, where Musk's pay is also entirely in stock options that only vest after ambitious market capitalization and operating profit targets are met.
GameStop said Cohen's compensation package consists of a tranche of stock options, allowing him to purchase more than 171.5 million shares of the company's stock at a price of $20.66 per share.
Calculations indicate that if GameStop's market cap targets are successfully met, the value of this award for Cohen would approach $35 billion, a figure that has not yet been adjusted for the approximately $3.5 billion cost of exercising the options.
Beyond the compensation package itself, an increase in GameStop's valuation would yield additional gains for Cohen. According to London Stock Exchange Group (LSEG) data, Cohen is the company's second-largest shareholder, with an 8.3% stake.
The billionaire investor joined GameStop's board in January 2021 and assumed the role of CEO in September 2023. During his tenure, Cohen has steered the company back to profitability through aggressive cost-cutting measures, including the closure of hundreds of stores.
The compensation package devised for Cohen is divided into nine tranches, with each tranche tied to the achievement of a specific performance target; a tranche only becomes eligible for exercise after its corresponding target is met.
GameStop stated that its board has reached an agreement with Cohen on this award. The company expects to hold a special shareholder meeting in March or April of this year, where it will ask shareholders to review and approve the compensation package.
