GameStop Corp. (NYSE: GME) is facing a legal challenge after an investor filed a lawsuit Monday seeking to halt a shareholder vote on a proposed $35 billion pay package for Chief Executive Officer Ryan Cohen.
The proposed class action, filed in Delaware’s Chancery Court, targets the board’s decision to grant Cohen stock option awards that could produce a multibillion-dollar payout if certain aggressive milestones are met.
Shareholders are currently scheduled to vote on the compensation package on July 7, making the legal challenge an urgent matter for both the company and its investors.
The proposed pay package would compensate Cohen with $35 billion if GameStop reaches a $100 billion market capitalization and $10 billion in earnings before interest, tax, depreciation, and amortization.
The lawsuit alleges that GameStop’s board repeatedly changed the procedures around the shareholder vote before issuing a misleading proxy statement designed to suppress turnout among public investors.
Those procedural changes included whether Cohen could vote his 9.3% stake in the company, as well as how abstentions would be counted in the final tally.
Lawyers for the plaintiff wrote in the complaint: “GameStop’s audacious attempts to reduce the power of its disinterested shareholders — in contrast to its prior public statements and in disregard of its Certificate of Incorporation — must stop.”
The complaint further stated: “Cohen may want $35 billion. That does not allow him and his board to disenfranchise stockholders and violate Delaware law along the way.”
According to the lawsuit, GameStop issued a press release indicating the vote would exclude Cohen’s shares and that “unaffiliated stockholders” would decide the result, before the board reversed course.
The board then issued a proxy statement that allegedly mischaracterized what it had previously done, a move the complaint says will allow Cohen and other insiders to determine the outcome with only about 15% support from public investors.
Cohen initially invested in GameStop in 2020, joined the board in 2021, and became chairman later that year, before taking over as CEO in 2023 and becoming the company’s single largest stockholder.
Cohen has defended the arrangement publicly, saying in a recent CNBC interview: “I obviously want to build something much larger, but I don’t benefit unless shareholders benefit.”
