Ryan Cohen Thinks You’re Dumb
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
Ryan Cohen Thinks You’re Dumb
Salacious headline, eh?
GameStop CEO and prominent five-header, Ryan Cohen thinks I’m dumb?
But my parents always told me how smart I am.
Yup.
Not only does he think you’re dumb. He’s counting on it.
This is:
Ryan Cohen Thinks You’re Dumb
So why are we talking about GameStop and Ryan Cohen?
Has he been a stellar CEO and taken the original meme stock to the moon since becoming forehead honcho?
No.
Ry guy became CEO of the house that Roaring Kitty built on 9/28/23.
The stock price was a dismal $16.84 then.
Now it is up to a glorious $21ish per share.
Up is good.
The only problem being that, if you are a GME investor, you are probably sticking around from the mania of 2021 and most likely are down over 50%.
But the stock price doesn’t tell the story of a company!
We care about the fundamentals!
Since Ryan put that massive brain to work in 2023:
Revenue is down:
Net income is getting better:
But it is only coming from aggressively cutting costs, like firing employees:
There is only so much juice to squeeze out from a cost-cutting perspective. Which brings us to his real business model for the company:
Half Cash, Half Stock.
More specifically:
Half Debt, Half Stock.
Ryan loves to take on debt and issue shares of stock.
The cash growth of the company has been impressive… until you realize it’s all from taking on debt and diluting shareholders.
As an investor, every time the company issues more shares, your piece of the pie is worth less than before. This is how Timberlake and Zuck screwed over Spider-Man in The Social Network.
There is also this move from the CEO who totally knows what he is doing:
“Hey Ry, got any projections on what the financials of the company will look like in twelve months? You can use as big of a range as you like.”
“No, I can’t possibly because I need to be super-secret about strategy!”
Eduardo Saverin would never.
So all this is to say Cohen hasn’t done much since taking over other than build a relatively big cash pile. I say relatively big because $9B seems like a lot, but it certainly isn’t big enough to go buy a large-cap company.
A company like EBAY, for example, is worth about $50B.
But Mr. Bighead’s big idea is to take them over at $56B anyway!
Which leads us to the worst performance from a CEO I have ever seen on CNBC:
If you didn’t watch the whole clip, they simply ask, “How does the math, math?”
To which Cool Guy Ry says:
Half Cash. Half Stock.
Any further pressing, he “doesn’t understand the question” and “the full details are on website.”
Sick dude.
Then he starts playing the “you guys called for our demise and we’re still alive!” card.
What a hero!
I get it.
It’s half cash and half stock.
Meaning he wants to take out massive amounts of debt to get more cash, and he is going to dilute the hell out of GME investors to offer stock.
Then they get to the real reason he is doing this:
To get paid.
Ryan doesn’t get a dime unless GME is at a size of $20B and profitable. GME is currently at a size of under $10B, and the profits are six times less than where he needs them.
What is the quickest way to get there?
Swallow up big ol’ EBAY for $56B by taking out huge debt and screwing over the current GME shareholders. Then massively cut costs by firing everyone at EBAY to drive up that short-term profitability and make himself billions.
The company would technically be bigger, but GME shareholders likely won’t see any increase in their investment.
To execute something like this, Ryan Cohen needs dummies to keep forking over cash.
He needs dumb money.
The institutions and the hedge funds are the smart money.
Retail investors and GameStop apes are the dumb money.
Ryan thinks you are dumb enough that you don’t see what is going on and will pour money into his pockets with the GME dream.
Ryan Cohen thinks you’re dumb.
Final Thought
If you were a fan of last week’s The Retirement Plan and want to play around with your own numbers, check out my new Retirement Calculator section of my website.
