The world of executive compensation has witnessed a new paradigm shift, with Tesla's landmark trillion-dollar pay package for Elon Musk paving the way for other companies to adopt similarly audacious incentive structures. GameStop has now entered this arena, unveiling a potentially massive long-term performance award for its CEO Ryan Cohen, who assumed leadership of the iconic video game retailer in late 2023. This bold move signals the company's confidence in its transformation strategy while raising important questions for investors about the stock's future prospects.
Under the newly proposed compensation framework, Cohen will receive no guaranteed salary, cash bonuses, or traditional time-vesting stock awards. Instead, his entire remuneration hinges on achieving specific financial milestones that could ultimately deliver tens of billions of dollars in value. This performance-based compensation model represents one of the most aggressive executive incentive packages in corporate America, directly aligning Cohen's personal wealth creation with shareholder value generation.
The structure centers on two critical metrics: EBITDA (earnings before interest, taxes, depreciation, and amortization) and market capitalization. GameStop intends to grant Cohen stock options to purchase more than 171.5 million shares at a strike price of $20.66 per share. At first glance, this represents over $3.5 billion in potential value, but the full magnitude of the award becomes apparent when examining the ultimate performance thresholds required for complete vesting.
To secure the entire compensation package, Cohen must guide GameStop to achieve $10 billion in annual EBITDA and propel the company's market valuation to $100 billion. Should these ambitious targets be met, his award would be worth more than $35 billion, placing him among the highest-paid executives in history. The plan incorporates a tiered vesting schedule, with portions of the award becoming accessible as the company reaches incremental milestones along its growth trajectory.
The first tranche, representing 10% of the total award, will vest when GameStop attains a $20 billion market cap and generates $2 billion in EBITDA. This initial hurdle alone requires the company to nearly double its current valuation and increase its profitability by an order of magnitude. Through the first ten months of 2025, GameStop has produced approximately $136 million in EBITDA, while its market capitalization stands at roughly $10.3 billion as of this writing. The gap between current performance and the ultimate goals underscores the transformative scale of growth required.
Shareholders will ultimately decide the fate of this compensation plan at a special meeting scheduled for March or April. The outcome will reflect investor confidence in Cohen's vision and their appetite for such a high-stakes, high-reward incentive structure. The question on every investor's mind is whether this represents a compelling reason to buy into GameStop's future or a cautionary tale of unrealistic expectations.
GameStop has indeed made measurable progress in reshaping its business model and improving its financial profile. The company has aggressively reduced its physical retail footprint, closing underperforming stores and optimizing its brick-and-mortar presence to better match modern consumer behavior. Simultaneously, GameStop has successfully expanded its newer collectibles business, which has shown remarkable growth throughout 2025. This segment now accounts for nearly 28% of total revenue through the first three quarters of the year, demonstrating the company's ability to diversify beyond its traditional core offerings.
However, this positive development exists alongside concerning trends in GameStop's legacy businesses. The company's software division, which includes sales of new and pre-owned video games, has experienced significant revenue declines. Similarly, the hardware segment, focused on video game consoles and accessories, continues to contract, though at a less severe rate than software. Together, these traditional businesses still generate over 70% of total revenue, meaning their ongoing deterioration poses a substantial headwind to overall growth.
Despite these challenges, GameStop has achieved notable improvements in key financial metrics. Operating cash flow, EBITDA, and net earnings have all shown positive momentum this year, validating some aspects of the turnaround strategy. Cohen's leadership has clearly made an impact, and his personal investment in the company's success extends beyond the new compensation package—he already owns more than 9% of outstanding shares, making him one of the largest individual shareholders.
The alignment between Cohen's interests and those of shareholders is undeniable. With no guaranteed pay and the vast majority of his potential wealth tied to long-term value creation, he is incentivized to pursue sustainable, profitable growth rather than short-term gains. This structure theoretically protects shareholders from executive decisions that might prioritize immediate results over lasting value.
Nevertheless, valuation concerns present a significant hurdle for prospective investors. GameStop currently trades at approximately 27 times its annualized 2025 earnings, a multiple that appears rich for a company struggling to stabilize revenue in its core business segments. This premium valuation suggests the market has already priced in substantial future growth, leaving little room for error in execution. Any missteps or slower-than-expected progress could result in significant share price volatility.
The meme stock phenomenon adds another layer of complexity to the investment thesis. GameStop's stock price has historically exhibited extreme volatility driven by social media sentiment and retail trader coordination rather than fundamental business performance. While this dynamic can create opportunities for short-term traders, it introduces additional risk for long-term investors seeking to build positions based on underlying value creation. The stock's erratic behavior may persist regardless of Cohen's operational achievements, potentially obscuring the company's true progress.
From a fundamental analysis perspective, several factors warrant caution. The required growth trajectory to achieve even the first vesting milestone appears daunting, necessitating a near-tripling of EBITDA and a doubling of market capitalization. The collectibles business, while promising, would need to expand dramatically to offset declines in the much larger software and hardware divisions. Additionally, the video game industry continues evolving toward digital distribution and cloud gaming, trends that could further pressure GameStop's traditional retail model.
Investors must also consider the dilutive impact of Cohen's potential stock option exercise. While the compensation plan could drive extraordinary value creation, fully vesting would increase the share count substantially, potentially affecting earnings per share and existing ownership percentages. This trade-off between incentivizing performance and preserving shareholder value requires careful evaluation.
The strategic rationale behind the compensation package is clear: attract and retain a proven leader while motivating transformational results. Cohen's track record with Chewy demonstrated his ability to disrupt traditional retail and build significant shareholder value. GameStop's board is essentially betting that he can replicate this success on a much larger scale, revolutionizing how the company operates and competes in the modern gaming ecosystem.
For investors, the decision to buy GameStop shares today involves weighing multiple scenarios. The optimistic case envisions Cohen successfully navigating the digital transition, building the collectibles business into a major revenue driver, and potentially leveraging GameStop's brand equity into new, high-margin ventures. In this scenario, early investors could see substantial returns as the company approaches the compensation plan's milestones.
The more cautious scenario acknowledges the immense difficulty of achieving the stated targets, the ongoing decline of core businesses, and the rich current valuation. Even with Cohen's proven capabilities and heightened incentives, the fundamental challenges facing physical game retail remain formidable. The company's transformation is still in its early stages, and the path to $10 billion in EBITDA is neither clear nor certain.
Ultimately, while Ryan Cohen's $35 billion incentive package creates an compelling narrative and aligns his interests squarely with shareholders, it does not fundamentally alter the company's near-term business realities. The compensation plan should be viewed as a long-term motivational tool rather than a guarantee of success. Investors must separate the excitement surrounding the executive incentive from the sober assessment of GameStop's current market position, competitive landscape, and valuation metrics. For those with high risk tolerance and belief in Cohen's vision, the stock may represent an interesting speculative opportunity. However, from a pure fundamental standpoint, the evidence suggests patience may be warranted until the company demonstrates more concrete progress toward its ambitious goals.