BCG recently filed a federal lawsuit against GameStop, the meme stock darling and video game retailer. BCG claims GameStop owes the firm around $30M in unpaid fees for work begun in 2019. GameStop says it will not pay up, claiming that BCG is overpriced and not worth what the renowned consultancy is charging. GameStop plans to fight the suit.
BCG-GameStop Lawsuit Not a Good Look for Either Organization
The lawsuit is not a good look for either side, regardless of how it resolves. It makes GameStop look like it’s trying to avoid paying up, but it doesn’t show BCG in the most favorable light either. Prospective BCG clients could be dissuaded from working with the firm and go with a competitor to avoid the drama. Both entities have reputations to protect, but it could be argued that BCG’s name will be the more tarnished one should the firm lose the suit.
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History of the Drama
BCG took on a turnaround project in 2019 when GameStop shares were trading at a low of $3.32 per share (compared to a then recent high of $55). The consulting firm was brought in by the company’s Chief Transformation Officer to help turn around the struggling company. This was a year before the Reddit-induced trading frenzy that brought GameStop’s share price up 1000%. Until this stock surge, GameStop was considered a dying retailer (ala Blockbuster).
However, once GameStop’s Chief Transformation Officer left the company, the engagement hit a snag and GameStop refused to collaborate on continued consulting work. BCG’s fee structure was set according to projected improvements for GameStop, which have materialized, but probably not due to the firm’s work. Is GameStop able to pay? Most likely. The company ended 2021 with $1.3B in cash and cash equivalents. But GameStop is still a volatile stock – in March alone, the stock yo-yoed from $78 to $189 per share.
Conclusion
The BCG-GameStop lawsuit is a spectacle, and a rare one at that for the management consulting world. Be on the lookout for more news and updates. Our best guess? The suit never makes it to court and both sides settle.
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