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Important background: https://investor.gamestop.com/news-releases/news-details/2026/GameStop-Announces-Long-Term-Performance-Award-for-Ryan-Cohen/default.aspx h

• hdgvhicv 6mo ago
  Wouldn’t that debt knock down the market cap as much as the value Otherwise take out a $20b loan and put it in the bank. Assets increase $20b, job done.
  • lesuorac 6mo ago
    Well, his argument is that he can remove inefficiencies in the combined company. GME is ~12B, EBAY is ~46B (58 total) with net income of 0.4B and 2B (2.4 total). If he boosts profit by 1.2B then it's nearly a 50% increase and probably going to result in a more valuable combined company despite the debt.
    • repelsteeltje 6mo ago
      > Well, his argument is that he can remove inefficiencies in the combined company. Sigh. The synergy argument, once again. While historically most mergers don't work out particularly well, I'm absolutely sure this time will be different.
      • falcor84 6mo ago
        "How do you make money? Spinoffs, split-ups, liquidations, mergers and acquisitions." - Mario Gabelli Just sample from these with replacement sufficiently many times and you're all set. At the very least, you'll owe people so much money that they'll have a massive interest in helping you.
      • jamesfinlayson 6mo ago
        I've been told that Australian company Wesfarmers fanatically avoids synergies when acquiring companies so that if the time comes to cast it off, there's no painful separation of a bunch of shared systems/departments/real estate etc.
        • repelsteeltje 6mo ago
          Not saying synergy is a dirty word, always. It's the assumption that there is a lot of overlap (which rarely materializes) and that assimilation or merging has no cost. In practice, company cultures are rarely aligned (the merger wasn't conjured by employees, they weren't even consulted) and frustrated talent leaves. Time is lost navel gazing. Synergy (i.e.: cost reduction) looks great in Q3 balance sheet, but in the mean time intrinsic company value has decreased. The long term prospect isn't so great.
          • jamesfinlayson 6mo ago
            Oh agreed - I was at a company that was the result of two companies merging and while the reduced head count was an easy synergy (don't need two legal, HR, cyber-security etc teams), everything else was pretty slow.
    • wongarsu 6mo ago
      He can argue that. But to me it seems more likely that culture and market demands are so different between the two companies that sharing any substantial resources would be to the detriment of at least one of the two halves. And more likely detrimental to both The most beneficial thing is how even proposing this shifts peoples' perception of Gamestop from a beloved but struggling brick and mortar chain to a successful business
      • cyanydeez 6mo ago
        the only benefit I can see is some kind of eBay pick up and verification scheme where sellers use the gamestop locations to send their products and buyers go theere to pick it up. That would basically create a "this is garbage feedback" that could cleanup some of ebay's long standing problems in trust.
        • mapt 6mo ago
          While this seems like the perfect synergy with a company that has too many branches and not enough business, those branches are also tiny. I'd bet employees are not enthusiastic about becoming UPS. Becoming Radio Shack / Microcenter, as far as 3D Printing and DIY electronics, seems like it intersects with their target audience more, but they're also probably pretty short on space for that.
          • cyanydeez 6mo ago
            yeah, their shops arnt sized to do much more than UPS style package movement. I dont see it as a good value, but it's the only thing I see as a synergy. Otherwise it's just more garbage capitalism.
            • alchemist1e9 6mo ago
              > garbage capitalism. How is this defined?
              • 6mo ago
    • OtherShrezzing 6mo ago
      >GME is ~12B, EBAY is ~46B (58 total) with net income of 0.4B and 2B (2.4 total). If he boosts profit by 1.2B then it's nearly a 50% increase and probably going to result in a more valuable combined company despite the debt. GameStop had revenues of $3bn last year and eBay was $10-12bn, so combined it's $13-15bn. A net income increase of 1.2bn on that gross is a tall order for M&A efficiencies. Especially difficult when the two companies have essentially zero operational crossover, besides business admin. It doesn't seem likely to me that merging eBay's accounting/legal departments into GME's (and similar efficiency gains) is going to save anything close to a billion across the two entities.
      • 59percentmore 6mo ago
        I don't think this is a serious assessment. For years, the core business of both companies has been facilitating the flow of used goods. Gamestop has moved strongly into collectibles recently, with a partnership with collectible grading firm PSA and the introduction of (essentially) lucrative trading card lootboxes, whereas eBay has capitalized on the same expansion of the collectibles market with new live/flash auction features. IIRC, Gamestop recently had a "trade-in anything" day, where they accepted a variety of products for store credit. Seems an awful lot like this was some sort of test for accepting products in-store for eBay listings, or something along those lines. They already accept trading cards to send off to PSA for grading and to place into their lootbox system. As far as efficiencies go, you can see things like shifting shipping by individual sellers to mass shipping to/from a warehouse, a much heavier footprint in collectibles, and perhaps quality control that reduces buyer disputes (this one's a bit iffy).
        • idiotsecant 6mo ago
          They are wildly different businesses. Ebay is not in the business of holding physical goods, they are a marketplace that connects buys, sellers, and shippers and adjudicates fraud, collects funds, handles taxes, etc. They are not a warehouse. Gatestop is a retail operation that buys and sells goods. It takes on all the liability for fake products, it puts capital on the line to purchase used goods, it is a totally different (and worse) business
    • Forgeties79 6mo ago
      That is a massive “if”
    • SwellJoe 6mo ago
      Which is a laughable argument.
  • sspiff 6mo ago
    There is precedent for this kind of trickery being played. For example, Honeywell acquired Garrett AiResearch, a well known manufacturer of turbochargers for combustion engines, through a series of mergers. Later on, it loaded them up with debt (over $1.5 billion, mostly asbestos related indemnity obligations from other parts of the business), before spinning them out as an independent entity again. Two years later, Garrett filed for bankruptcy claiming it was succumbing to the unsustainable debt burden placed upon it by its former owner.
    • stevefan1999 6mo ago
      So you mean...marrying someone but transfer all the personal debt to the others, then divorcing so that I have no responsibility whatsoever? Not even an obligation to settle for the debt just like disappeared through an expired relationship?
      • BigTuna 6mo ago
        Welcome to late stage capitalism
        • chatmasta 6mo ago
          This is early 1990s capitalism.
          • BigTuna 6mo ago
            1980s even. It takes a while to siphon off all the value built up by multiple generations.
            • lanstin 6mo ago
              The hidden truth about economics in my lifetime.
      • nashashmi 6mo ago
        Is there a legal term for this kind of restructuring of debt?
  • ineedasername 6mo ago
    Depends on how market cap is defined for the purpose of the contract. Typical definition is just against floating shares in the market * share price. Debt doesn’t factor in at all except in so far as it will influence investor confidence -> share price. That said: conceptually it’s not an awful fit for GameStop. In so far as video games discs and cartridges were the main disposable belonging i had as a kid and the main target for new purchases, Funcoland was (later to become GameStop), if you squint your eyes, a brick & mortar eBay scoped to only video games. If you’d been an SV startup at the time pitching the eBay concept you could have said “it’s like funcoland, but online and for anything and also lets people sell peer to peer “
  • graemep 6mo ago
    They are paying half in GameStock equity. They will issue new shares so they will buy Ebay of $55bn, but add only $20bn debt. Its good for GameStock management who will end up running a much bigger business. https://investor.gamestop.com/news-releases/news-details/2026/GameStop-Proposes-to-Acquire-eBay-at-125-00-Per-Share/ https://investor.gamestop.com/news-releases/news-details/202... Game Stock management is essentially claiming that they can run Ebay better than the current management so Ebay shareholders will end up better off by selling to Game Stock: they get some cash and shares in a business that will be mostly a better run Ebay. Very possible bad for GameStock shareholders who will end up with a smaller stake in a bigger business.
    • eloisant 6mo ago
      It that's bad for GameStock shareholders, surely they'll vote against it?
      • brookst 6mo ago
        Do they get a vote?
    • 59percentmore 6mo ago
      It depends. If Gamestop is able to find the efficiencies that the CEO is claiming, EPS jumps between 50 and 100 percent. Gamestop shareholders get diluted down to owning a smaller piece of a much bigger earnings pie. That's if you don't engage in any conspiracy theories about how many shares retail traders really own (don't go down that rabbit hole). Suffice it to say, the Gamestop's price floor has gone up each time it's been diluted in the past few years. Perhaps lower highs, but higher lows. And a company that can afford to try a stunt like this.
      • graemep 6mo ago
        True, that is why I said "very possibly". The market seems mildly positive about i so far. its a big promise. Is Ebay really THAT badly run that they can find such efficiencies?
  • deleted 6mo ago
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• fontain 6mo ago
  Cohen is already rich rich, his GameStop compensation doesn’t really matter much. The eBay acquisition could be a strategy to juice his compensation but I think it is much more likely he does believe that he can achieve his stated aims, which will financially benefit him much more in the long term.
  • ascorbic 6mo ago
    I'm not sure the fact that somebody is already rich rich would make them less likely to perform ethically dubious practices to juice their own compensation. In fact I'd say the opposite is more likely.
  • idiotsecant 6mo ago
    If there's anything rich people famously hate, it's making more money.
    • groundzeros2015 6mo ago
      Unlike poor people who are indifferent to money.
  • Forgeties79 6mo ago
    Few CEO’s in the US are rewarded for longterm thinking when there are unsustainable quarterly gains to be made. GameStop also has a strange history, especially the last decade, that no one could possibly describe as “cautious” or “planning longterm.” I also can’t name a single CEO who had the mentality of “I’m rich enough to make personal/financial sacrifices for the good of the company.” That’s simply not how things work. I’m sure an example exists but it would clearly be an exception to the rule.
    • dgellow 6mo ago
      Nintendo CEO cutting his salary in half to avoid firing employees https://www.cnbc.com/2024/02/13/nintendo-ceo-once-halved-salary-to-prevent-layoffs-why-thats-uncommon.html https://www.cnbc.com/2024/02/13/nintendo-ceo-once-halved-sal...
• SideQuark 6mo ago
  Market cap will price in the debt, as it always does. Empirical evidence (dig through Google scholar) finds that cash assets, debt, profits, settlements, and the like, all are reflected in market cap changes at over 99% accuracy (the 1% is from measurement noise, so it may well be 100%). Making debt of that form illegal would kill any company that needed money to stay afloat, such as during some emergency, or war, or COVID, or tons of events that companies regularly survive.
• bko 6mo ago
  > other than the should-be-illegal process of putting debt on the acquired company's balance sheet. This is silly. No different than buying a house w/ borrowed money based on using that house as collateral. Banks aren't stupid. If it's very likely to fail and the interest doesn't cover the risk, banks won't risk. There's typically no upside to banks. At best they get their interest and at worst they lose everything.
  • ZiiS 6mo ago
    It is different. You need somewhere to live. Buying a second home with what would presumably need to be at least a 90℅ mortgage is at best questionable.
    • glenngillen 6mo ago
      I think your example if proving their point: that's exactly what happens and is incredibly common.
  • hdgvhicv 6mo ago
    > Banks aren't stupid. If they can gamble with other people’s money then why won’t they. If they can get rid of those liabilities by offloading them in a hidden way why wouldn’t they. If it all collapses and the government bails Them out, oh well.
  • acdha 6mo ago
    > Banks aren't stupid. Even a cursory familiarity with the history of the industry shows both that this is untrue but also that it’s leaving out many of the core reasons why finance is regulated. Bankers do make mistakes, but also their focus is on what makes them a profit now rather than what’s good for their client or the country long term. The bank does not care if GameStop goes bust as long as that happens after the loans are repaid or, most likely, sold. None of the guys who sold incredibly dodgy mortgages—if you weren’t in the market in the late-2000s, they would literally let applicants pencil in their income and not check it—went to jail for packaging those mortgages up so many times removed that they couldn’t reliably prove the loan even existed and reselling them with inflated ratings, and absolutely none of them had to repay their bonuses. Once they found a buyer for an “AAA” derivative, foreclosure was a problem for the retirement fund left holding it after a couple of sales. That’s what I’d expect here, too: they’ll make some flashy announcements to juice share prices (“AI powered auctions paid in crypto!”) and sell that debt, spin whatever’s left into a subsidiary which splits off, and then profess complete surprise when that goes bankrupt.
• sheepscreek 6mo ago
  Taking a $20b loan from TD Bank + sitting on $9b CASH + GameStop stock for the rest. They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment. Smart if they can make it work. Update: Numbers still don’t add to $55b - I think there’s a $14b shortfall. Not sure about how they are planning to fund that.
  • bhouston 6mo ago
    > They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment. Is that really an advantage? Fulfilment is always handled by a lot of places for the big e-retailers for returns, which is similar to what eBay needs for sellers. How much does Staples charge for its Amazon return fulfillment where you don't even need to wrap up the item? It is really popular: https://www.staples.ca/a/learn/amazon-returns-now-available-at-staples-canada-retail-stores https://www.staples.ca/a/learn/amazon-returns-now-available-... I question whether it is advantageous to use GameStop stores for this or just to piggy back on what Staples is already offering to Amazon and others for their returns? Fulfilling returns for Amazon isn't significantly different to shipping eBay orders.
    • noitpmeder 6mo ago
      My kneejerk is that most consumers these days expect delivery for items purchased online, and allowing them to pick up their items at a brick and mortar probably isn't the issue. Now, dropping off items you're selling? That probably removes a decent hurdle for many first-time/one-time users who aren't familiar with shipping (what box/label/insurance/padding/...).
      • bhouston 6mo ago
        > My kneejerk is that most consumers these days expect delivery for items purchased online 100%. > Now, dropping off items you're selling? This is what Staples is offering to Amazon but for returns - quite similar. And they could offer them to eBay as well I am sure. You do not need your own chain of brick and mortar stores to do this and I am sure the cost per drop off would be cheaper with Staples than your own chain that only serves you. GameStop is a game of constant pivots that sound good to its meme-believers that do not really work in the real-world.
• jjallen 6mo ago
  I’m disappointed and surprised you left out half of the conditions that grant him this compensation and only included one that suggests that all he has to do is buy a bigger company with GME stock: “ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.” This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow as well.
  • Aefiam 6mo ago
    It doesnt really change much, by buying a company its future ebitda will be included, it only delays the reward by some time. So yes he can just buy a bigger company
• jjallen 6mo ago
  I’m disappointed and surprised you left out half of the conditions that grant him this compensation. You only included the one that suggests that all he has to do is buy a bigger company with GME stock. It was literally the first paragraph of your link: “ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.” This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow, cumulatively, as well.
  • cj 6mo ago
    I was under the impression that it was either or, not both. Either reach market cap goal or EBITDA.
  • graemep 6mo ago
    The first two market cap hurdle is almost certain to be achieved, and the second should be easy (its less than current market cap plus value of new equity to be issued).
• getnormality 6mo ago
  > the should-be-illegal process of putting debt on the acquired company's balance sheet. I agree it's weird but ultimately the check against dumb lending is natural consequences for the lender, right? If you ask me for billions in loans for your zero revenue company and I give it to you, whose problem is that but my own?
  • consp 6mo ago
    In the modern world if you are a bank you will be bailed out eventually, thus your problem becoming everyone's problem.
    • boringg 6mo ago
      Ah-hem SVB?
      • vallassy 6mo ago
        An outlier in historical terms (i.e. the last 20 years) https://projects.propublica.org/bailout/list https://projects.propublica.org/bailout/list
        • deleted 6mo ago
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        • deleted 6mo ago
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      • matwood 6mo ago
        SVB was not bailed out. Depositors were made whole (as they should be), but shareholders were completely wiped out (as they should have been).
        • boringg 6mo ago
          My point exactly.
• fasteo 6mo ago
  >>> should-be-illegal process of putting debt on the acquired company's balance sheet This is a basically a leveraged buyout (LBO). All private equity works this way. Yes, it should be illegal, or at least heavily limited. I highly recommend this book: "Plunder: Private Equity’s Plan to Pillage America"
  • triceratops 6mo ago
    Is it still "private equity" if a public company takes a loan to buy another public company?
    • nyeah 6mo ago
      It's still an LBO, in effect borrowing against the target to get control of it.
      • xnx 6mo ago
        Is that bad? No one is forcing the lenders to make that bet, and the lenders can lose money if the acquired company can't pay back the loan.
        • toraway 6mo ago
          It may not be bad for the buyers, lenders, or the previous owners who all profit. But even then it could still be bad for regular people/society at large if it incentivizes anti-consumer practices by financial necessity when an otherwise healthy business suddenly has billions of dollars of debt it has to pay off ASAP. In which case it sort of looks like a simple transfer of wealth from existing customers to the organizers of the leveraged buyout with no broader societal value provided like new jobs created, R&D, etc.
        • imtringued 6mo ago
          You have a company "funded" with its own equity and now you turned it into a company exclusively made out of outside capital and an obligation to realize the terms of said outside capital. Before, you could have had bad years in-between the good years, now you're only permitted to have good years and by good years I mean years that honor the financing terms. When you understand this, you realize that functionally speaking, nothing has changed really, other than that the cost of financing has gone up significantly, since the company can't rely on its own equity anymore. Now the company can no longer earn what it currently earns, it needs to earn that plus some. Hence the deal was nothing but a burden to the acquired company. The previous owners realized the value of their shares and don't have anything to complain about. The new owner acquired control over the company they wanted. So who is left to carry the burden? The employees and the customers.
• rahimnathwani 6mo ago
  Whether the acquirer or target borrows the money, this would not allow to increase the market cap of the company. It would increase the enterprise value (because the debt allows you to make a bigger acquisition), but not the market cap.
• vmbm 6mo ago
  If the market is "efficient", then the debt should work against the market cap. For example if we assume a $50B offer at 50%/50% debt and stock, then we should expect the market cap to only increase by $25B. And for GME shareholders, they should expect their stock price to stay roughly the same because that $25B market cap would be offset by a corresponding increase in the number of shares. The debt would increase the enterprise value of the company, which is the more comprehensive metric to use when trying to value a company as it takes into account both debt obligations and cash on hand. Of course the market may move the price up or down based on how much they like the merger. If they think there is some synergy here, they may move things higher. If they think the debt is too burdensome or have other issues with it, they will move the price lower. But all things being equal, any market cap increase of a buyout should be offset by the dilution that was incurred to finance the deal. What looks like a "hack" here though, is that Cohen tied his incentive structure to market cap and not share price. The fact that his award is in the form of options and not RSU's does add some incentive for a higher share price, but at the end of the day, it looks like he can get 100% of his award by simply buying companies using dilutive stock issuance. Not sure how much the GME faithful appreciated that at the time of the vote. I think Elon did something similar in his incentive package.
• Nifty3929 6mo ago
  It is not at all clear to me why people get upset about using borrowed money on the balance sheet of the acquired company. Say company B wants to buy company A. Company A is worth $20B, but the buyer doesn't have that much, and the original owners/shareholders want to get paid. So Company A takes out a $20B loan, paying out the original owners, making that company worth $zero. Now Company B gets it - it's still worth zero because of the fat loan, but now Company B is the owner. I don't feel like anybody got taken advantage of in this financing model. In fact, this is pretty close to what happens in the US real estate market. When I buy a house I take out a loan against that house. It's non-recourse, so it's very much like the house borrowed the money, not me. In any case, I got the house with a lot less money than the purchase price. Sometimes nearly zero from me in fact. I do understand why people get angry about what often happens next - layoffs and such - but I think that's very independent of the financing used to purchase the company. The acquirer could pay all cash using money from it's own bank account, and then still lay a bunch of people off - and in fact that often happens.
• chrisss395 6mo ago
  Yes...but isn't his employment contract structured to incent this kind of move? His pay is 100% at-risk in the form of 170M+ stock options that only vest if he hits some astronomical targets. I'm just not sure his rationale is completely objective given such a structure...
  • conductr 6mo ago
    > I'm just not sure his rationale is completely objective given such a structure... Which is why the board would have to approve the deal and he can’t act alone on it. He was hired to create and execute the strategy including finding the target. The real question is, why did he get hired to do something anyone could have done?