I think we have a first. We have a CEO, George Sherman, who has been fired after delivering a 780% return on GameStop (GME) stock in 2021. That's got to be a new record after amassing an amazing total return for shareholders.
Now before you call me a knucklehead, before you say that I have been mentally quarantined, I know that the move in the stock can be traced directly to activist Ryan Cohen and his buying which began back in September of last year. Cohen put together a 9 million stake at $8.43 and the stock really has been off to the races. Sherman's just been along for the ride. Still, we can't NOT give credit to the CEO for generating that performance, especially given that his tenure started in 2019, when the stock was substantially lower.
Mind you we really don't know what Cohen is thinking. He's talked boldly about digitizing GameStop and his vision has been embraced by a whole new legion of buyers led by the largely anonymous posters at on Wall Street Bets which is a Reddit tip sheet.
Cohen helped start Chewy (CHWY) which is enough for many people to believe that he can reinvent GameStop. As one of his last acts Sherman sold stock for the company which enabled it to have both a balance sheet and a war chest. Sure it is entirely possible that he fought this move and then agreed with Cohen and caved at the last minute making it on him that he orchestrated a stock sale, something that I urged the company to do and was roundly criticized as villainous. That suggestion and my view from my hospital bed when the stock was at $330 and I begged people to sell some has earned me lasting enmity from the anonymous posters. In other words, it's okay to sell stock if you are influenced by Ryan but not if you think it's right yourself.
What matters now is the plan, the one that the Wall Street Bets pumpers are all over as if there is one. I have offered my plan: turn the 5000 odd stores into bitcoin banks where you can exchange dollars for bitcoin at the best prices and then having a gaming palace at the end of the mall, in some open defunct store, so people can play for bitcoin prizes. That makes it digital and it also makes it more in synch with the times given that a hardware cycle like we are in now doesn't last and we will soon be in a software cycle, digital downloads, which will decimate the current earnings and truly test Ryan and company. It's almost as if as long as Cohen does nothing then the stock can go higher but if he actually tries something and it doesn't immediately work people will just move on.
They already are doing just that in the entire market. Goldman Sach's David Kostin in his always prescient weekend note talks about the dramatic slowdown in recent retail buying. "While online retail broker daily average trades are still up year over year the growth in trading has dropped sharply from the peak of 250% in August 2020." Call volumes, he continues, are down to the lowest levels of 2020. I think that's a direct reflection on 1.) How poorly the highest growth stocks have done of late, especially if you were playing them with calls as was often the case, and 2.) The inability of GameStop to reclaim its ephemeral heights where a lot of people purchased stock. Now there's so much ennui about reading about the same name that it's no wonder there's been such a drop off.
The intensity of the crowd remains heated, there's lots of chatter about how a revered trader, Keith Gill, aka, Roaring Kitty, has doubled the size of his multi-million investment, obviously thrilled at the departure of Sherman, not that Sherman seemed to be opposed to whatever Cohen wanted to do.
Now with Sherman out, everything, including every mistake, is now on Cohen rather than the good moves being made by Cohen and the bad ones being made by Sherman. I hope there is a plan for the Wall Street Bets people beyond GameStop because at some point there will be nothing to say and maybe, they just fade away.