GameStop Chairman and CEO Ryan Cohen has been hit with a $1 million civil penalty for an antitrust violation related to his acquisition of Wells Fargo shares.
This Wednesday, the U.S. Federal Trade Commission (FTC) announced that Cohen’s failure to file required documents triggered the penalty. The GameStop stock, already on a downward trajectory, saw a 3% decline following the news, trading at $19.62 at the time of reporting.
FTC fines Ryan Cohen $1 million for HSR Act violation
The FTC’s complaint highlights that Cohen purchased over 562,000 voting securities of Wells Fargo, surpassing the filing thresholds required under the Hart-Scott-Rodino (HSR) Act. This act mandates that companies and individuals report significant transactions to federal antitrust agencies. Cohen failed to file the appropriate HSR form, leading to the penalty. His acquisition did not qualify for exemption under the Investment-Only Exemption, as his stake was below 10% of the company’s outstanding voting securities.
The FTC’s investigation revealed that Cohen influenced Wells Fargo’s business decisions while acquiring these shares. Emails advocating for a seat on the board provided further evidence. The FTC voted unanimously to accept the settlement and passed the case to the Department of Justice.
HSR Act filing requirement and civil penalty
The Hart-Scott-Rodino Act requires individuals and entities to report transactions that exceed specific thresholds to the FTC and DOJ for review. The purpose is to ensure that large acquisitions do not harm competition in the marketplace. The agencies have a 30-day window to investigate transactions after they are reported. When Cohen made the corrective filing, the maximum civil penalty for this violation was $43,792 per day.
GameStop reports a decline in net sales
GameStop also released its second-quarter financial results for 2024, reporting a significant drop in net sales. The company posted $798 million in net sales, down from $1.164 billion in the same quarter last year. Administrative expenses were also reduced to $270.8 million, compared to $322.5 million in the prior year’s second quarter.
Despite the decline in net sales, GameStop reported a notable improvement in profitability. The company posted a net income of $14.8 million for the quarter, a turnaround from the net loss of $2.8 million in the same period last year. GameStop also reported cash, cash equivalents, and marketable securities totaling $4.204 billion. The penalty imposed on Cohen, combined with the financial challenges faced by GameStop, adds to the hurdles the company must navigate as it seeks to stabilize its position in the market.
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