Posted by n1b0m 1 hour ago
CEO gets paid "only if GameStop achieves a market capitalization of $20 billion." Buying a $55bn company would certainly achieve that quickly. I'm not sure how they'd manage that (buy with what? Memes?), other than the should-be-illegal process of putting debt on the acquired company's balance sheet.
Otherwise take out a $20b loan and put it in the bank. Assets increase $20b, job done.
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.
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
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.
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.
How is this defined?
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.
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).
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.
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.
> 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.
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.
When the merger concludes, GameStop-eBay will issue the former shareholders of eBay $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-b...
Imagine yourself (if your morality allows) a typical Wall Street CEO at the center of this hurricane force money windfall driven by internet memes. What else would you do, other than ride it all the way to the bank using the most dubious financial shenanigans known to man?
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.
Also, eBay shareholders can vote down the acquisition if they don't think the deal is good for them.
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.
The shareholders have to vote for it, though.
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.
A quick search for how leveraged acquisitions, stock-for-stock deals, financing commitments, or tender offers work would answer most of the objections.
Is it too much to ask the Hacker News commentariat to do one quick search before collectively declaring that something they don’t understand is impossible?
> It is implicit in many comments.
> It is implied in many comments.
Isn’t the assumption that it’s impossible intuitively justified if you have no background in finances? A small fish usually can’t devour a bigger fish either.
Also, all those terms you mentioned mean nothing to me. You can’t search for what you don’t know exists.
I don't see how such leveraged acquisitions should be legal.
Before I started paying attention to such things I wouldn't have known a single one of those terms to even begin googling.
And let's be honest here. A smaller company saddled with big debt buying out an even larger company really doesn't make logical sense. It makes financial sense, which is subject to different laws of mathematics, probably involving the waiter's check pad in an Italian bistro.
Are you new here?