GameStop (GME) has issued a letter to stockholders urging them to vote for Gamestop’s 10 ‘highly-qualified’ directors at the upcoming annual meeting on June 12. According to GameStop, the two candidates nominated by ‘dissident stockholders’ Hestia Capital Partners and Permit Capital Enterprise Fund “lack the qualifications or experience to serve on GameStop’s Board of Directors.”
“Hestia Capital Partners and Permit Capital are running a costly and distracting proxy fight, founded on baseless claims and significant misrepresentation of facts” the company stated.
It points out that over the last two years, the company has ‘comprehensively refreshed’ the board to oversee its business transformation strategy – GameStop Reboot. “Our refreshed Board benefits from the fresh perspectives of our newest directors and the institutional memory of our longest-serving directors, all of which is critical to our successful execution of this transformation plan” GameStop says.
According to the letter, “Hestia Capital’s founder, Kurtis Wolf, has “rejected settlement offers to avoid a proxy fight that would have included a stockholder representative simply because he was not the stockholder representative.” It also points out that these dissident stockholders supported a ‘reckless’ share buyback of $500 to $700 million in 2019 despite the fact the company had an upcoming $350 million debt maturity.
GameStop shares surged 64% in April driven by the disclosure of additional share purchases by a high-profile investor, the ongoing proxy fight, and a business update- but have since dropped back 23%. And the outlook from the Street appears grim with a Moderate Sell consensus. In the last three months, GameStop has received 3 hold ratings, 2 sell ratings and no buy ratings. Meanwhile the average analyst price target of $3.81 indicates 14% further downside potential lies ahead.
“We are downgrading shares to Neutral from Outperform given the significant headwinds that GameStop faces from coronavirus and the challenging current-gen video game retail marketplace” explained Wedbush analyst Michael Pachter. (See GameStop stock analysis on TipRanks).
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