Leading gaming retailer GameStop has undergone significant managerial turmoil over the past year. In November, CEO Paul Raines stood down from his position, citing health concerns. Sadly, Raines passed away a few months later and the void he left in the company does not appear to have been filled. Raines’ replacement, Michael Mauler, caused a stir shortly after his appointment when he fired two leading GameStop executives.
Mauler has now left the company himself after a period of only three months.
The managerial uncertainty has significantly affected GameStop’s share price. Shares in the company have dropped by 45% over the past 12 months, despite what gamesindustry.biz describe as “a reasonably strong financial performance.”
Understandably, investors are concerned. Influential hedge fund Tiger Management are leading the way. Despite insisting that they “remain a passive shareholder,” Tiger have sent a letter to GameStop stating that they believe “an unprecedented opportunity” exists to “revive shareholder confidence in the sustainability of the GameStop business model”.
Tiger Management appear particularly eager for GameStop to rid itself of “ancillary” businesses that “drain valuable resources.” The offending companies named by Tiger are Technology Brands, ThinkGeek.com and International Segments.
Tiger Management made it quite clear that if their concerns aren’t addressed they would be prepared to sell their shares in GameStop and “redeploy capital towards more attractive investment opportunities.”
Just how heavily this threat will weigh on GameStop management is open to debate. CNBC, who broke the story, believe that the Tiger Management possessed only 25,000 shares in GameStop at the end of the last quarter, but may have increased this while remaining below the 5% cut-off point that requires additional filings.
GameStop confirmed that they had received the letter and emphasised that they value “constructive input that may help increase shareholder value”. The company’s co-founder, Daniel DeMatteo, acting as caretaker CEO, and his board will now have to decide whether to follow Tiger’s advice or not.