On November 20, 2022, an interview with Ryan Cohen and Joe Fonicello of GMEdd.com is published.

Superstonk thread

wallstreetbets thread

The following is a transcript from the interview, lightly edited for better readability (e.g., removed any instances of “um”, “uh”, things like that).

JF: Welcome to GMEdd’s interview with the one the only Ryan Cohen. I’m Joe Fonicello your host for the next hour. Ryan serves as the chairman of GameStop and the manager of RC Ventures. Ryan, this is your first public appearance in over two years and the only time you’ve sat down with anyone for an extended interview like this. Why have you remained so quiet despite the attention?

RC: Well first of all thank you for hosting me, I’ve been incredibly impressed with a level of diligence that GMEdd has done for GameStop and for the community and I couldn’t think of a more appropriate channel to have this conversation with. Secondly in terms of why haven’t I done anything up until now, I haven’t had time, I’ve been focused on work so. Sorry for my dog in the background, but I haven’t had time to play I’ve been focused on work, so it’s taking up all of my time.

0:55

JF: Before everything with GameStop, you were the founder and CEO of Chewy at the age of 25. Can you talk about what building Chewy meant to you and what you learned from that experience?

RC: Can you hear the dog in the background?

JF: That’s perfect.

RC: It’s a real dog by the way it’s not just sound effects. What did I learn from Chewy? Chewy was hard. We built Chewy in Florida, it was very hard to raise capital, we we’re a bunch of nobodies. It’s like three states basically account for like 75 percent of venture capital: New York, California, and Massachusetts, so raising capital was really difficult to Chewy, attracting talent was very difficult to Chewy, especially being in in Florida the talent pool was pretty limited and we were selling 30 pound bags of pet food online and so that wasn’t very popular either against the backdrop of pets.com, so, first everyone said pets you know this you can’t make the unit Economics work selling 30 pound bags of pet food, and then once we had positive unit economics everyone said that Amazon was going to crush us, and neither of those things were true. But it was very very tough It’s a low margin business, part of the secret sauce was just how we structured it, we had negative working capital, we took the business from like 200 million to three and a half billion, we burned through less than 150 million of cash even though we accumulated significant losses, so, we turned our inventory over faster than our payment terms, but granted, going ahead to head against Amazon selling 30 pound bags of pet food in the mail - tough business.
GameStop on the other hand, in many ways – you know Chewy was like a new construction, we built the business from the ground up, knew the business inside and out, GameStop is different. We inherited a bunch of legacy everything, and under-investment across the entire business – people, the entire technology stack, just decades of neglect and so it’s hard to turn around a brick and mortar retailer that’s under the kind of pressure that GameStop was and continues to be under, but that was also part of the attraction going into GameStop was that a transformation the likes of GameStop was was really unprecedented and I was motivated by that and, you know, similarly selling 30 pound bags of of pet food in the mail was also very unpopular and we figured it out so, yeah, I like tough things. I don’t like to make my life easy for whatever reason.

3:44

JF: You’ve made yourself into a pretty prolific activist investor. Is RC Ventures evaluating other opportunities in this market and what do you look for?

RC: I’m always looking for opportunities. What do I look for? Yeah and of course I mean it’s a better it’s definitely a better environment and market to allocate capital today than it’s been you know in a very very long time at least in the past decade.
So I like consumer businesses, that’s my core competency and you know I like simple businesses.

4:21

JF: How big is RC Ventures?

RC: You’re looking at RC Ventures team.

4:26

JF: So why did you invest in GameStop?

RC: I invested in GameStop because I thought it was cheap I thought the intrinsic value of the business was worth more than the price that I paid, there was a tremendous amount of skepticism around GameStop and those are the things that I like. I like looking at things where no one is looking at them. Those are usually some of the best opportunities.
And I’d say the opposite of that is IPOs where you know the animal spirits are out and everyone’s kind of standing in line trying to give them money – GameStop was on the opposite end of that.
No one was interested in investing in GameStop at the time that I made the investment it was hugely unpopular and those are the things that attract my attention. I’m contrarian by nature and so it was a pretty contrarian investment at the time.

5:23

JF: Yeah there are some contrarians online, what did you know about the enthusiasm from some retail investors over GameStop on digital communities like Wallstreetbets?

RC: I learned about, I mean I’d say I only really noticed that when I first filed my 13d – I lost my 13d virginity in August of 2020. So I was a late bloomer, and that’s when I noticed retail activity. And then when I filed subsequent amendments I noticed it, but it was something that snowballed over time and it was impossible to predict frankly. So obviously we know what happened, we know what happened afterwards in January, but you know I learned about it really when everyone else learned about it.

6:11

JF: Yeah last we spoke you refer to the events of January 2021 as one of the most fascinating things that has happened in the history of financial markets, and it was life-changing for us retail investors. What was it like for you?

RC: I was, when I decided to join the board personally, I made a long-term commitment to be at the company for an extended period of time, and so there was a lot of deliberations or I’d say board drama going on after I joined the board that really had nothing to do with the volatility in the markets and had everything to do just with the transformation and everything going on at the company, and so we changed the composition of the board, we got rid of the entire board we got rid of all the professional directors, we changed up the entire management team and so I was just I was focused on making all of the changes at the company and that consumed all of my time.

7:12

JF: Do you think what happened then could ever happen again?

RC: I don’t know, I mean that’s hard to predict what’s going to happen in financial markets. Anything can happen. Anything can happen.

7:25

JF: When you think about the attention GameStop’s received since then how has that impacted the company’s transformation?

RC: It’s great branding I mean there’s no amount of money that can get the kind of branding that that we got from Gamestop, so, you know, it made the company world renowned, it brought a lot of attention to the company and, net I mean I think it was hugely hugely beneficial for the brand.

7:54

JF: Yeah I remember when that happened we made a post on GMEdd saying this is the great opportunity to rebrand all the stores across the globe to GameStop because that was just free marketing you know for everyone to know the GameStop name and you did end up changing Canada over to GameStop. So, founding a company poses a different set of challenges than transforming a legacy business. How are Chewy and GameStop different or alike?

RC: They’re both contrarian. Selling, – you know there were all the comparisons with Chewy to pets.com, and then GameStop to Blockbuster, it was harder to raise capital at Chewy, it was you know every time we raised capital we basically had one option, when we were hiring was very difficult we were unknown quantity in Florida, I’d say at GameStop you know we’ve been able to raise capital, we’re fortunate that we were able to do two ATMs, it’s been easier to hire, being in the public markets and having that level of visibility.
But in terms of the actual business that – the business is more challenged at GameStop even if you look at the the cohorts and the customer retention, at Chewy selling consumables online we had really sticky customers and at GameStop it’s completely completely different. You don’t have sticky customers, so you know we had a payback period and a certain lifetime value whereas at GameStop you got to make back your money right away when you spend money on customer acquisition, so it’s definitely a different dynamic.
Having said that though, if you look at GameStop and the brand and you know the store base and the strategic assets of the company, the size of the the customer database, you know there’s a lot of strategic and just the revenue base frankly, I mean we needed to build that revenue base at Chewy, no one had ever heard of it, it was literally a customer by customer, whereas with GameStop it’s a known quantity already, and we’ve got a business and a foundation to build off of, but having said that, it’s a foundation that was under invested in for a very very long time and we’ve been working really hard to restore and rebuild that foundation.