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It's the leveraged buyout playbook. You buy a company and use its own assets to secure a loan. Then you "find efficiencies" (strip it for parts to pay yourself
by hdndjsbbs 5mo ago
It's the leveraged buyout playbook. You buy a company and use its own assets to secure a loan. Then you "find efficiencies" (strip it for parts to pay yourself and the creditors).
- 59percentmore 5mo agoIn this case, if the deal goes through at the price given, eBay's liquid assets are untouched. The cash portion is paid out entirely through the loan and Gamestop's cash.
- CWwdcdk7h 5mo ago> $20 billion in debt financing This debt will carried by company resulting from merge. It might be not classic leveraged buyout but if they have any trouble with repaying it, it will end in asset liquidation all the same.
- 59percentmore 5mo agoThat's true. But they also have a $6 billion cash cushion to try to service that debt.
- hdndjsbbs 5mo agoYes, the loan is the leverage. It's secured against the assets of eBay. If the acquisition fails to produce efficiencies the resulting company has a bunch of extra, arguably unnecessary debt from the acquisition that a free-standing eBay wouldn't have.
- 59percentmore 5mo agoBig if. I think you could frame the debt as lacking necessity but presenting opportunity.
- hdndjsbbs 5mo agoIn theory eBay should be one of those bubbly dot-com companies that kind of settled into a lifestyle business by virtue of longevity. It's no longer commanding insane multiples but it has revenue and a dedicated fanbase. They sold off Paypal which was (afaik) the only stable/growing part of the company. So you're taking a big, but slow-changing auction website and stapling it to a dying brick-and-mortar retail business which survives on meme stock issuance and their die-hard fanbase gambling.