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GameStop doesn't have (even close to) $55.5B. Their offer from the letter is literally impossible: > Our offer is $125.00 per share, comprising 50% cash and 50
by orlp 5mo ago
GameStop doesn't have (even close to) $55.5B. Their offer from the letter is literally impossible:
> Our offer is $125.00 per share, comprising 50% cash and 50% GameStop common stock
Even if you magically included all existing GameStop stock in the offer, it still would not comprise 50% of $55.5B.
EDIT: looks like it's not impossible and I misunderstood. It's a proposed change of leadership with a $25B injection of cash to sweeten the deal. GameStop would issue shares which would capture the original eBay value (since GameStop would own eBay after the trade), making that part a wash. At least assuming people owning eBay stock currently would value the combined company at at least the sum of their parts, which is a big if.
- airstrike 5mo agoIt's newly issued stock, a common form of making acquisitions cheaper
- wongarsu 5mo agoHow is a 20bn company going to issue 27bn worth of stock? Or are they just going to pretend the newly issued shares are valued the same per share as existing stock is right now?
- gizajob 5mo agovia a cunning pump on Wall Street Bets
- deleted 5mo ago[deleted]
- ryandamm 5mo agoBecause it acquires an asset worth roughly that much, it’s neutral. GME is (probably!) not doing a huge at-the-market offering, they’re creating the shares and immediately giving them to eBay shareholders. In practice the price paid for the company being acquired is usually a bit higher than the market value (so the shareholders take the deal), and the market usually punishes the acquirer a bit and the resulting entity’s stock will fall a bit. (This is most definitely not investing advice.)
- airstrike 5mo agothe stock they'd be issuing would be for (GameSpot + eBay) whereas the current stock is for GameSpot alone
- Lionga 5mo agoHave your ever heard of debt? They have a 20B line secured from TD.
- orlp 5mo agoYes, that goes into the '50% cash' part of the offer. With a 20B credit line and 7.5B cash from their own coffers (which they claim to have, so let's believe them on their word there), you cover the cash portion. The issue is the non-cash portion of the offer. They claim that the remaining 27.5B is covered by GameStop stock. But that's more than double the market cap of GameStop.
- Lionga 5mo agoYou understand that the gamestop stock would then be owning ebay, thus be worth Ebay + Gamestops Valuation?
- orlp 5mo agoAlright, my company MEME offers to buy Apple then for $1 plus 100% of MEME's stock, which is worth more than Apple then since it will own Apple. If you word it like this it's just a hostile proposed change of leadership. Weird way to apply to become CEO of eBay, but sure.
- surgical_fire 5mo agoThey would also be owning a company that now would have +20B in debt. They now own ebay. They would include in that math 20B in debt plus Gamestop. This sounds like a pretty bad deal for ebay investors.
- ceejayoz 5mo agoIsn’t that just a https://en.wikipedia.org/wiki/Leveraged_buyout https://en.wikipedia.org/wiki/Leveraged_buyout ?
- AureliusMA 5mo agoYup.
- croemer 5mo agoThe stock part is more like a merger than a buyout.
- sigmoid10 5mo agoThat's just for the cash part. The stock part makes no sense. For this 50/50 deal to work in principle, they'd need to issue around a billion new shares, which would massively dilute the existing ~450M shares. So Ebay shareholders would suddenly own 70% of Gamestop after the deal. It's also highly questionable if investors actually believe the combined stock is worth that much, so the stock price would probably fall and turn those 70% into >90%. At this point it basically becomes a reverse acquisition plus a large loan for the final company from the cash part of the deal.
- ryandamm 5mo agoThis is not atypical; smaller company “buys” the larger company with debt on the larger company’s books. The blended shareholder mix is mostly the larger company; management comes from the smaller company. The one I was most familiar with was the Discovery “acquisition” of Warner Brothers. Though apparently that’s a little complicated because AT&T was divesting itself of Warner.
- Animats 5mo agoYes. See [1] for an overview of how this works. When the SEC filing is made, we'll get to see how the deal is structured. The $20 billion from TD Securities becomes a debt obligation of the combined company. There's a tax break in equity to debt conversion, and a second tax break for carried interest. [2] There may be a preferred stock deal or debt refinancing so that TD gets their $20 billion back. Usually, the private equity firm exits within a few years. [1] https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.23.1.121 https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.23.1.121 [2] https://www.pgpf.org/article/what-is-the-carried-interest-loophole-and-why-is-it-so-difficult-to-close/ https://www.pgpf.org/article/what-is-the-carried-interest-lo...
- gizajob 5mo agoI don’t understand why eBay shareholders will suddenly want GME memestock and find any interest in voting for this.
- bilekas 5mo agoI don’t understand either but wouldn’t they still be owning eBay? Just with GME?
- gizajob 5mo agoI’m not totally sure how it would be structured but if GME is the purchaser then the merged company would be listed under GME and eBay would become a brand in the GME group and no longer a stock listed under the eBay ticker. The whole thing seems incredibly dubious and fishy. The eBay board should vote this down which is why the CEO of GME has already realised that and said he’ll appeal to the shareholders directly. If eBay wanted to load themselves with twenty billion dollars of unnecessary debt and extra complications which would kill the company then they could do it themselves. They’re not in that kind of business.
- vessenes 5mo agoThere is, literally, nothing fishy about this offer. It’s a cash and stock offer from a public company to public company shareholders. We could call the financial or shareholder benefits to ebay dubious (I don’t hold any opinion about this) but this is a very aggressive offer, and allows the chance for GME to keep some cash - if enough shareholders of ebay opt for stock, then they’ll have cash available after. Plus they’d keep whatever current net assets ebay has. ebay was at like 100 before the offer went out, it’s trading up to 120 or so in early hours this morning, so speculators and institutional desks do not find this offer fishy or dubious - they are pricing it as likely to be pretty well received. As a side note, one of many plays you might make in this situation is what Cohen has done here; they bought a bunch of options. Those options are now worth a lot; before the letter if it was all options, they controlled $2b of EBAY shares, today that’s $2.6b. We might imagine the options at least doubled the underlying return. The market had not priced in a rapid jump to $120 when he bought them. If the deal closes, then this will put at least another billion or two of liquid capital into GME.
- cyanydeez 5mo agoman, those GME bagholders are gonna love diluted shares.`
- CWwdcdk7h 5mo agoThey already increased total number of stock by +39% in last 12 months, GME will squeeze the last penny from those people.
- deleted 5mo ago[deleted]
- vessenes 5mo ago… and the stock has not dropped 39%, in fact it’s trading about where it was a year ago. Shareholders have been content to let Cohen add to the balance sheet, adjust operations and make a large move. This is one such move. And GME is up 5+% in pre trading, so shareholders are generally positive about this idea.
- cyanydeez 5mo agothe shareholders of GME operate under the delusion that there's gonna be another magic short squeeze.
- fineIllregister 5mo agoIf Cohen's "large move" was to buy EBay, investors could have done that themselves. They would have gotten a better deal on shares in the new company. Also, they'd be up 50% over 12 months. Partly because Cohen "adding to the balance sheet" has meant dilutions, and there will be more for this deal.
- JumpCrisscross 5mo ago> GameStop doesn't have (even close to) $55.5B When the merger concludes, the former shareholders of eBay will have $27.5bn of GameStop-eBay stock and $27.5bn of cash. (“Cohen said GameStop has a commitment letter from TD Bank to provide up to $20 billion in debt financing” and “GameStop has around $9 billion in cash on its balance sheet to put toward a deal” [1].) [1] https://www.wsj.com/business/deals/gamestop-is-offering-to-buy-ebay-for-56-billion-ceo-ryan-cohen-says-fd330f5a?mod=mhp https://www.wsj.com/business/deals/gamestop-is-offering-to-b...
- notepad0x90 5mo agowhy do i keep seeing comments of this sentiment? can't they just take loans? I thought there were serious consequences to making an offer, and then backing out , especially if the other party accepts your offer.
- solumunus 5mo agoIt’s wild to me that you believed that they would make an impossible offer.
- dlcarrier 5mo agoBoth stocks went up in value after the announcement, so it's a good sign that if it comes to it, eBay stock holders would vote for a merger, because they value the combined company at at least the sum of their parts.