Chapter 1: What bet is GameStop's CEO making on the company's future?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Wednesday, January 7th, and I'm your host, Kim Kahn. Our top story so far, GameStop's CEO is making a moonshot bet on a return to meme-era valuations.
GameStop announced that its board approved a long-term performance-based stock option award for chief executive Ryan Cohen with no guaranteed compensation. The package only pays out if the company hits a series of aggressive market value and profit targets.
The award covers options on 171.5 million GameStop shares at an exercise price of $20.66, split into nine tranches tied to market cap and cumulative performance EBITDA. The stock trades around $21.75 today. And the milestones? They start at a $20 billion market cap and $2 billion in cumulative EBITDA and scale up in 10% increments.
Full vesting requires GameStop to reach $100 billion market cap and $10 billion in cumulative EBITDA, numbers that would eclipse even the peak of the mean stock frenzy. For context, GameStop's current market value is $9.3 billion. Its all-time high was $33.7 billion during the 2021 short squeeze.
Also in the salary sphere, new Berkshire Hathaway CEO Greg Abel will receive an annual cash salary of $25 million, effective January 1st.
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Chapter 2: What are the performance targets tied to Ryan Cohen's compensation?
That's a major jump from Warren Buffett's long-time compensation, a $100,000 base salary, and just over $305,000 in additional pay. Among active stocks, that's all folks, at least as far as Warner Bros. Discovery's board is concerned.
The board unanimously rejected Paramount Skydance's amended tender offer, saying it still undervalues the company, leads too heavily on debt, and leaves shareholders exposed if the deal falls through. WBD reiterated its support for the Netflix tie-up and urged investors to reject Paramount's bid.
D-Wave Quantum is gaining attention after agreeing to buy Quantum Circuits for $550 million, a mix of stock and cash. The deal pairs D-Wave's scalable superconducting control tech with Quantum Circuit's error-corrected gate model approach. And Evercore ISI says Apple remains its top hardware pick, pointing to steady iPhone strength and potential upside from an AI-powered Siri upgrade.
On the economic front, ahead of Friday's official jobs report, ADP said private sector employment rose by 41,000 in December, rebounding from a 29,000 drop in November but missing the 47,000 consensus. In addition, the November Job Openings and Labor Turnover Survey, or JOLTS,
showed openings fell to $7.146 million in November, well below the consensus of $7.648 million and the lowest level since 2024. In other news of note, what price memory? You heard in today's Wall Street Breakfast about the rally in memory chip stocks as prices climb.
Now, Samsung president and head of global marketing, Wonjin Lee, is echoing concerns that rising costs are reaching the point where they'll hit everyone in the supply chain. There's going to be issues around semiconductor supplies, and it's going to affect everyone, Lee told Bloomberg at CES. Prices are going up even as we speak.
Obviously, we don't want to convey that burden to the consumers, but we're going to be at a point where we have to actually consider repricing our products. And in the Wall Street Research Corner, you say GIF, I say GIF, but what do they say about where stocks are heading? A new academic paper introduces a sentiment gauge called GIF Sentiment, built from millions of GIF posts on StockTwits.
The researchers find that GIF Sentiment is positively tied to same-day S&P 500 returns, but negatively predicts returns over the following month. They argue that GIFs with motion and sequential images act like mini-stories about past events and future forecasts, making them especially engaging as expressions of market mood.
Crucially, GIF sentiment outperforms some traditional sentiment measures, including text-based analysis and the Baker-Wergler Sentiment Index when it comes to predicting reversals. The effect is strongest in small caps and high-volatility portfolios, the parts of the market most vulnerable to investor bias.
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