Activist investors slam GameStop board for destroying $ 2.5 billion in shareholder value
Hedge funds seeking to install two administrators on the GameStop (NYSE: GME) The board alleges that the current members have destroyed $ 2.5 billion in shareholder value over the past five years, while causing company debt.
Hestia Capital Partners and Permit Capital Enterprise Fund hold 7.2% of the capital video game retailer stock and they allege that seven board members are responsible for GameStop’s $ 825 million debt to fund share buybacks at around $ 30 per share, while selling their own shares for around $ 48 per share.
Now GameStop is working to refinance some $ 420 million of that debt before its March 2021 due date.
No skin in the game
While GameStop has been a surprise beneficiary COVID-19 stay-at-home orders, hedge funds allege the video game retailer is in worse financial shape than it would otherwise be.
In one letter to shareholders, they say the current board initiated $ 1.3 billion in buybacks at $ 29.86 per share between 2012 and 2016, at a time when one director sold $ 630,000 worth of shares and another sold a quarter of his holdings at $ 41.96 – that’s the stock he was given, not bought. In total, the directors sold over $ 64 million in stock during that time.
They also say the board is trying to take credit for the sale of Spring Mobile, when it was in fact other investors who urged the company to do so, and that didn’t happen. only after a misguided acquisition of Telecom and Simply Mac.
Hedge funds say the seven directors handpicked their successors who lack the experience to turn the business around.
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