NEW YORK, June 2, 2020 /PRNewswire/ -- Hestia Capital
Partners LP ("Hestia"), Permit Capital Enterprise Fund, L.P.
("Permit") and their affiliates (the "Investor Group"), who
beneficially own approximately 7.2% of the outstanding shares of
GameStop Corp. (NYSE: GME) (the "Company"), announced that
Institutional Shareholder Services ("ISS"), a leading independent
proxy advisory firm, has recommended that stockholders
vote the Investor's Group WHITE proxy card FOR the election of
Paul J. Evans and Kurtis J. Wolf at the Company upcoming
Annual Meeting of Stockholders on June 12,
2020.
John Broderick, a Partner with
Permit, stated, "We are gratified that ISS recognizes the need for
more change to GameStop's Board. ISS' recommendation provides
significant validation that our nominees have the expertise
required to oversee a much-needed turnaround."
Kurtis Wolf, Managing Member of
the General Partner of Hestia, added, "We are pleased that ISS has
recognized the need for capital markets expertise and stockholder
representation on GameStop's Board. We invested in GameStop because
we believe GameStop is a valuable business with significant
competitive advantages in the game retailing industry. It is our
hope to have the opportunity to work with GameStop's directors,
leadership team, employees, customers, and partners to restore
value to all GameStop stakeholders."
In reaching its conclusion, ISS performed a detailed analysis of
both sides' positions and considered, among other items, the
Company's operating and stock price underperformance, and need for
a turnaround plan. In recommending that stockholders vote on the
WHITE proxy card FOR the election of Paul J. Evans and Kurtis
J. Wolf, ISS stated:1
"Early indicators, such as mixed operational
performance, strategy concerns, and continued share price decline,
suggest that the potential benefits of adding both dissident
nominees – including a direct representative of a significant
shareholder – outweigh any additional continuity benefits offered
by retaining the targeted legacy directors. As such, support for
Paul Evans and Kurtis Wolf is warranted on the dissident
card."
ISS was critical of the Board's reactive mentality when making
changes to the Board, commenting:
- "…while GME may have attempted operational and strategy
improvements, the company consistently ignored board composition,
effectively changing the tires while disregarding the check engine
light."
- "Moreover, while the responsiveness of the longer-tenured
directors is appreciated, it is unclear how Kelly and Davis will
contribute. GME argues that they will ensure a smooth transition
and knowledge transfer. In a sense, these directors created a
problem and are selling the solution, as they likely would
not be in a position to credibly argue that their continued
presence is necessary had they overseen a more regular refreshment
regimen. This link to the past is also present in the
collective background of the newly-appointed independent directors,
which skews heavily toward retail, despite the need for skills to
address increased digitalization and near-term financial
priorities."
ISS also identified the shortcomings of the Board's GameStop
Reboot strategy, stating:
"In the investor presentation, GME simply states that the
focus in FY2020 is on strengthening the balance sheet, building
substantial liquidity, and taking a disciplined approach to capital
expenditures with an emphasis on more optimized returns. It is
unclear what this will mean on a more granular level. This
criticism can be extended to the entirety of the GameStop Reboot
strategy."
Conversely, ISS recognized the significant value the Investor
Group would bring to addressing short-term turnaround and long-term
strategic issues at the Company, stating:
- "The dissident group's members have been invested in GME for
nearly a decade, and… [are] asking the right questions about the
implications of near-term initiatives on future
viability."
- "GME will eventually need to determine what the company's
role will be in the digital gaming ecosystem of the future. These
considerations underscore the need for skills that could assist in
the ongoing turnaround, and further suggest that the board may
benefit from the perspective of a large shareholder."
ISS acknowledged the need for the additional cost cuts suggested
by the Investor Group, adding:
"Management is optimistic about the progress made thus far
with expense control, and suggests that the extent of the savings
is yet to be fully reflected. It is nonetheless troubling that
GME has failed to deliver more tangible results, particularly since
this initiative is a short-term strategic priority. Moreover,
the overarching timeline and the target itself – $100 million (approximately 5.0 percent of FY2018
SG&A) by FY2021 – may not be aggressive enough given the
urgency of the circumstances."
In conclusion, ISS stated:
"[Mr. Wolf] is a large, longtime investor in the company with
public board experience. He has skin in the game, which is a
missing piece at the board level. Evans, on the other hand, not
only has public board experience, but he has capital markets
expertise. Thus, he could assist the board, which is arguably
retail-focused, in navigating and overseeing management's treatment
of urgent financial matters, such as refinancing concerns. As such,
he is also a logical addition. As such, support for Wolf,
Evans, and all management nominees on the dissident group's card is
warranted."
ISS HAS RECOMMENDED GAMESTOP STOCKHOLDERS VOTE THE WHITE
PROXY CARD.
VOTE THE WHITE PROXY CARD TO ELECT BOTH OF OUR HIGHLY
QUALIFIED NOMINEES, PAUL J. EVANS AND KURTIS J. WOLF, TO THE BOARD
AT THE COMPANY'S UPCOMING ANNUAL MEETING.
If you have already voted GameStop's blue proxy card, a later
dated WHITE proxy card will revoke your previously cast
vote.
If you have any questions about how to vote, the Investor
Group's proxy solicitor Saratoga Proxy Consulting can be reached at
info@saratogaproxy.com or (888) 368-0379.
About Hestia Capital
Hestia Capital is a long term
focused, deep value investment firm that typically makes long-term
investments in a narrow selection of companies facing
company-specific, and/or industry, disruptions. Hestia seeks to
leverage its General Partner's expertise in competitive strategy
and capital markets to identify attractive situations within this
universe of disrupted companies. These companies are often
misunderstood by the general investing community and provide the
'price dislocations' which allows Hestia to identify, and invest
in, highly attractive risk/reward investment opportunities.
About Permit Capital Enterprise Fund
The Permit
Capital Enterprise Fund, through its management company, follows an
investing philosophy that seeks to identify securities trading at a
discount to intrinsic value. The investment approach is bottom-up
and focused on the valuation of the securities of individual
issuers. The management company's assessment of intrinsic value is
based on its own fundamental research as well as numerous sources
of publicly available information.
Contacts:
Kurt Wolf at 724-687-7842
John Broderick at
610-941-5025
1 Permission to quote from the ISS report was
neither sought nor obtained. Emphases added.
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SOURCE Hestia Capital Management, LLC & Permit Capital
Enterprise Fund, L.P.