GameStop CEO Ryan Cohen has agreed to pay nearly $1 million in penalties to settle allegations from the US Federal Trade Commission (FTC) about his acquisition of Wells Fargo shares.
The FTC announced this settlement on Wednesday (September 18), detailing how Cohen failed to disclose his purchase of over $100 million in Wells Fargo voting shares, a requirement under the Hart-Scott-Rodino (HSR) Act, according to Reuters.
Ryan Cohen's Wells Fargo Acquisition
The HSR Act mandates that significant transactions, like the acquisition of many shares, be reported to federal agencies to allow them to review the deal before it is finalized.
Cohen acquired these shares in 2018 but did not inform the FTC until 2021. The FTC found that Cohen's actions violated the HSR Act. He did not qualify for the Investment-Only Exemption due to his involvement in company management and push for a board position at Wells Fargo.
The FTC's complaint revealed that Cohen obtained 562,077 voting securities from Wells Fargo, surpassing the HSR Act's $100 million filing threshold. This lack of disclosure led to a breach of the act, which is designed to prevent anti-competitive practices and ensure transparency in large transactions, according to Fortune.
Cohen's acquisition and subsequent involvement in Wells Fargo's business decisions were brought to light through his emails, which included requests for a board position. The FTC's report also noted that the highest civil penalty for this infraction could be $43,792 per day.
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GameStop Store Closures
In addition to the fine, the FTC referred the matter to the Department of Justice for further review. This legal issue comes as GameStop faces its financial challenges under Cohen's leadership.
The company recently released its financial results for the second quarter of 2024, reporting a significant drop in net sales from $1.164 billion to $0.798 billion year-over-year. Despite this, GameStop reported a net income of $14.8 million, a notable recovery from the previous year's net loss of $2.8 million.
Administrative expenses for the company were $270.8 million, representing 33.9% of net sales, compared to $322.5 million or 27.7% of net sales in the same period last year. The company holds $4.204 billion in cash, cash equivalents, and marketable securities.
Ryan Cohen, who also founded Chewy.com, became a prominent figure at GameStop, joining the board in January 2021, being appointed chairman in June of the same year, and taking on the CEO role in September 2023. His venture capital firm, RC Ventures, has a significant stake in GameStop.
Franchise Herald previously reported that GameStop is set to close more stores this year due to poor financial performance and a shift toward digital gaming. The company, struggling with declining sales from physical stores, announced a review to determine which locations will shut down.
GameStop had already closed 287 stores in 2023 and continues to face challenges from the rise of digital downloads and online shopping.
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