The US Federal Trade Commission (FTC) on Wednesday announced that Chairman and CEO of GameStop Corp Ryan Cohen would pay around $1 million civil penalty to settle charges of an antitrust law violation related to his acquisition of Wells Fargo shares.
GameStop shares price continued its declining trajectory as FTC filed a civil penalty against Ryan Cohen. GME price dropped by around 3% to trade at $19.62, at the press time. However, it is still up by 41% over the past 6 months.
FTC slaps $1M fine on Ryan Cohen
As per FTC, the complaint suggests that the founder and former CEO of Chewy, Inc, Cohen bought more than 562,000 Wells Fargo voting securities. This move resulted in aggregated holdings of Wells Fargo securities that eventually exceeded HSR filing thresholds.
It mentioned that Cohen’s purchase triggered an obligation to file an HSR form with federal antitrust agencies. GameStop CEO failed to do so which violated the HSR Act. The complaint added that Cohen’s acquisition of Wells Fargo voting securities was not exempt under the Investment-Only Exemption of the HSR Act. His holding represented below 10% of the outstanding voting securities of the company.
Gamestop CEO is alleged to be influencing Wells Fargo ’s business decisions while acquiring shares. His emails advocating for a board seat are turned up as evidence in the matter. The commission voted 5-0 to accept the settlement and referred the matter to the Department of Justice.
The highlighted HSR Act asks companies and individuals to report large transactions. This includes securities acquisitions, over a certain threshold to the FTC and DOJ. It is done so that federal agencies can investigate the deals before they close. As per the release, the agencies have 30 days after a transaction gets reported. The maximum civil penalty for this violation at the time Cohen made the corrective filing was $43,792 per day.
GameStop net sales drops
GameStop recently released its financial results for the second quarter of 2024. It reported net sales of $0.798 billion which is much down compared to $1.164 billion in the prior year’s second quarter. GME’s administrative expenses stood at $270.8 million (33.9% of net sales) which was lower to $322.5 million (27.7% of net sales) seen in the last year.
The company posted a net income of $14.8 million for the second quarter which shows a huge improvement from the net loss of $2.8 million for the last year’s second quarter. The cash, cash equivalents, and marketable securities stood at reportedly $4.204 billion for the session.
