PITTSBURGH, March 12, 2020 /PRNewswire/ -- Hestia Capital
Partners LP, Permit Capital Enterprise Fund LP and their
affiliates, who beneficially own approximately 7.5% of the
outstanding common stock of GameStop Corp. (NYSE: GME), announced
today, after the expiration of a year-long standstill agreement,
that they have delivered a letter to GameStop's Board of Directors
requesting that they take immediate action to appoint a stockholder
representative to the Company's Board of Directors.
Kurt Wolf, Managing Partner and
GP of Hestia Capital Partners stated, "While we certainly applaud
the Board for finally recognizing the need for well-overdue changes
to its composition and skillset, we remain concerned with this
Board's ability to make positive progress without persistent
stockholder engagement from inside the boardroom."
John Broderick, a Partner with
Permit Capital added, "Now that the Board has announced the
addition of three new Board members and the impending retirement of
six long-tenured Directors over the next 16 months, we believe
there is ample room for a stockholder representative to join this
Board."
The full text of the letter follows:
Permit Capital
LLC
|
Hestia Capital Management LLC
|
100 Front Street,
Suite
900
|
175 Brickyard Road.,
Suite 200
|
West Conshohocken,
PA
19428
|
Adams Township,
PA 16046
|
(p)
610-941-5025
|
(p)
724.687.7842
|
john.broderick@permitcap.com
|
kwolf@hestiacapital.com
|
March 12, 2020
Sent via Email
The Board of Directors
GameStop Corp.
625 Westport Parkway
Grapevine, TX 76051
Dear Members of the Board:
Permit Capital Enterprise Fund LP ("Permit") and Hestia Capital
Partners LP ("Hestia"), together with their affiliates ("we"), are
long-term stockholders of GameStop Corp. ("GameStop" or the
"Company"), collectively owning approximately 7.5% of the
outstanding stock. Permit and Hestia formed an investment group in
2019 for the purpose of constructively engaging with the Company to
address numerous concerns about the Company's underperformance,
which we believe is deeply rooted in this Board's poor
governance.
In early April 2019, we entered
into a Cooperation Agreement (the "Agreement") with the Company
that has effectively muted our voice and prevented us from
expressing our increasing concerns publicly. Now that the Agreement
has ended (and our ability to speak publicly has been restored), we
want to be sure the Board and our fellow stockholders understand
that we believe it is imperative for the Company to add a
stockholder representative to the Board.
Although the pending departure of four long-tenured directors,
along with the appointment of three accomplished new Board members
is a step in the right direction, we note that no Director on the
Board will own a meaningful stake in the equity of GameStop. In
fact, after the Board changes, no independent Director will own
more than 86,000 shares, which is equal to approximately
$355,000, or roughly 1.3x the Board's
annual fees.
Stockholders have lost 85% of the value of their investment over
the last five years. In our view, professional managers simply do
not have the same perspective as those of us that have suffered
this loss and continue to be invested in the Company. Moreover, as
shown in the table below, a majority of positive changes over the
past fourteen months appear to have come only as a result of
stockholder pressure.
Recent Stockholder
Demands
|
Company
Response
|
May 16,
2018: Julian Robertson's Tiger Management sends open
letter urging the Board to undertake a strategic review, and
specifically sell the Technology Brands division (among other
changes)
|
January 16,
2019: GameStop sells Spring Mobile (the major business
within Technology Brands) for $700M
|
February 12,
2019: Hestia writes a public letter to the Board, urging
it to seek efficiencies and cost savings in SG&A (among other
changes)
|
April 2,
2019: GameStop announces that it will undertake an effort
to achieve operating profit improvements of approximately
$100M
|
March 13,
2019: Permit and Hestia write a public letter to the
Company urging the Board to add new Directors with the requisite
skills to help lead GameStop's turnaround efforts
March 28,
2019: Permit and Hestia nominate four highly qualified
candidates to GameStop's Board
|
April 24,
2019: GameStop appoints Raul Fernandez and Liz Dunn to its
Board of Directors
|
February 12,
2019: Hestia's public letter urges the Company to repurchase a
meaningful amount of stock through a tender offer, noting the
Company is severely undervalued
June 6,
2019: Permit and Hestia send a private letter to the
Board regarding poor performance, urging the Company to repurchase
shares in the wake of a precipitous stock price decline after the
Company reported weak results and eliminated its
dividend
|
June 10,
2019: Company announces intent to launch a tender offer
for up to 12 million shares of its stock. The Company
ultimately repurchases 12 million shares for $62.4M
|
July 22,
2019: Permit and Hestia write an email to the Company
stating that, "(s)o long as the company continues to own, and
regularly use, a corporate jet, it is hard for stockholders to
believe that their interests are being taken seriously."
|
December 11,
2019: Company files its third quarter 2019 10-Q, listing
its corporate jet as a $12.8M asset held for sale, after taking a
$7.7M impairment on the asset, as of November 2, 2019. The
previous 10-Q, which covered the period ending August 3, 2019, did
not list the jet as an asset held for sale
|
August 16,
2019: Well-regarded investor (and 3% GameStop stockholder)
Michael Burry sends a public letter to the Board urging the Company
to complete its remaining $237.6M share buyback
authorization
|
December 11,
2019: Company files its third quarter 2019 10-Q, showing
the repurchase of 22.6M shares at an average price of $5.11 between
September 1, 2019 and November 2, 2019
|
September 12,
2019: Permit and Hestia send a private letter to the
Board, urging Board members to purchase shares individually to
"fulfill the obligations set forth under the Company's stock
ownership guidelines" and to "reinforce the Board's confidence in
the future."
|
September 20 -
September 30, 2019: Five Directors purchase almost 97,000
shares between September 17 and September 27, 2019; representing
the first purchases by any of the current eleven Directors in over
nine years
|
April 2019 -
Present: During the span of Permit and Hestia's Agreement,
we have repeatedly called on the Board to engage with stockholders
to refresh the Board to avoid the likelihood that stockholders
pursue a proxy fight in order to drive needed change
|
March 9,
2020: Three days before Permit and Hestia's Agreement is
set to expire, the Board announces plans to add three new Directors
and have four long-tenured Directors retire. Two additional
Directors have agreed to leave the Board over the following 16
months, essentially creating three open vacancies on the
Board
|
In our opinion, a well-functioning Board addresses issues
proactively, not reactively after stockholders are exasperated
enough to express their concerns to the Board. We believe a
fully-aligned stockholder representative can make an enormous
difference in the boardroom by advocating on behalf of all GameStop
stockholders on a regular basis.
On March 10, 2020, we spoke with
CEO George Sherman in a final
attempt to persuade the Board to change its previous stance and
consider the appointment of a stockholder representative to the
Board. Mr. Sherman indicated that the Board had not seriously
considered our (oft-repeated) recommendation because they did not
believe that the skills of a stockholder were a top priority for
the Board. We believe the Board's history of passivity and
value destruction prove otherwise.
We wholeheartedly believe that the difference between the
Company's current share price (in the low $4s) and the intrinsic
value of GameStop, which we believe is in the high teens, will only
be realized if the Company is properly governed. The opportunity
for value creation is so enormous that we must continue to advocate
for stockholder representation on the Board.
As has been the case for over a year, we stand ready to try to
work with the Board to address the need for stockholder
representation on the Board. We look forward to continuing the
dialogue which was restarted over the past couple of days with
George regarding stockholder representation. If we cannot
convince the Board that adding a representative of a large
stockholder is valuable, we are prepared to nominate candidates for
election to the Board at this year's annual meeting.
Sincerely,
|
|
|
|
|
John
Broderick
|
|
|
|
Kurtis J.
Wolf
|
Partner
|
|
|
|
Managing Member of
the GP
|
Permit Capital
Enterprise Fund
LP
|
|
|
|
Hestia Capital
Partners, LP
|
CERTAIN INFORMATION CONCERNING THE
PARTICIPANTS
Hestia Capital Partners LP ("Hestia LP") and Permit Capital
Enterprise Fund, L.P. ("Permit Enterprise"), together with the
other participants named herein (collectively, the "Stockholder
Group"), intend to file a preliminary proxy statement and
accompanying WHITE proxy card with the Securities and Exchange
Commission ("SEC") to be used to solicit votes for the election of
its slate of highly-qualified director nominees at the 2020 annual
meeting of stockholders of GameStop Corp., a Delaware corporation (the "Company").
THE STOCKHOLDER GROUP STRONGLY ADVISES ALL STOCKHOLDERS OF THE
COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS,
INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE
AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV.
IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL
PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN
AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO
THE PARTICIPANTS' PROXY SOLICITOR.
The participants in the proxy solicitation are anticipated to be
Hestia LP, Hestia Capital Management, LLC ("Hestia LLC"),
Kurtis J. Wolf, Permit Enterprise,
Permit Capital, LLC ("Permit LLC"), Permit Capital GP, L.P.
("Permit GP"), and John C.
Broderick.
As of the date hereof, Hestia LP beneficially owns directly
906,600 shares of Class A common stock, par value $0.001 per share (the "Common Stock"), of the
Company. Hestia LLC, as the general partner of Hestia LP, may be
deemed to beneficially own the 906,600 shares of Common Stock of
the Company directly owned by Hestia LP and an additional 394,500
shares of Common Stock of the Company held in certain separately
managed accounts. Mr. Wolf, as the Managing Member of Hestia LLC,
may be deemed to beneficially own the 906,600 shares of Common
Stock of the Company directly owned by Hestia LP and an additional
394,500 shares of Common Stock of the Company held in certain
separately managed accounts. In addition, Mr. Wolf is deemed to
beneficially own 21,400 shares of Common Stock that are
beneficially owned directly by Mr. Wolf, his wife and various
trusts for the benefit of his children.
As of the date hereof, Permit Enterprise beneficially owns
directly 3,053,536 shares of Common Stock. Permit GP, as the
general partner of Permit Enterprise, may be deemed to beneficially
own the 3,053,536 shares of Common Stock of the Company directly
owned by Permit Enterprise. Permit LLC, as the investment manager
of Permit Enterprise, may be deemed to beneficially own the
3,053,536 shares of Common Stock of the Company directly owned by
Permit Enterprise. John C.
Broderick, as a Partner of Permit LLC with sole voting and
dispositive power over such shares, may be deemed to beneficially
own the 3,053,536 shares of Common Stock of the Company directly
owned by Permit Enterprise. In addition, Mr. Broderick beneficially
owns directly 576,645 shares of Common Stock of the Company, which
includes 3,825 shares of Common Stock of the Company that are
beneficially owned directly by his wife.
Contacts:
Kurt Wolf at 724-687-7842
John Broderick at 610-941-5025
View original
content:http://www.prnewswire.com/news-releases/investor-group-sends-letter-to-gamestop-board-commenting-on-board-refreshment-301022237.html
SOURCE Hestia Capital Management, LLC; Permit Capital Enterprise
Fund, L.P.