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- Hacker News
- This is just a leverage buyout and it will likely result in the slow death of both parties while there is value extraction for those in control. Think Sears, Toys R US and similar.
The CEO has a very specific deal where he gets paid significant compensation for specific valuations, which this is likely to achieve. That is value extraction at the cost of shareholders who will be on the hook for the leveraged loan and which will likely wipe them all out over time.
by bhouston - Anyone who is interested in how this sort of thing could work, or interested in how it has worked, could read the book "Barbarians at the Gate".
(https://en.wikipedia.org/wiki/Barbarians_at_the_Gate)
This sort of acquisition is typically called an LBO or Leveraged Buy Out. The story gets into the details of key figures involved, including Henry Kravis who people today would better know for his private equity firm KKR.
Basic formula is raise cash using junk bonds, buy company, fix up company or kill off costs, use money company earns to pay debt, sell company. Since you have leveraged, your payout can be large.
It's a similar style financing activity to a house flipper. example: buy house for 1M, but pay $200K + 800K debt (mortgage). Fix up house, sell for $1.2M. Pay off $800K debt. You're left with $400K, or 100% return!
by blobbers - A lot of the comments here seem to assume that a smaller public company can’t acquire a larger one, which just isn’t true.
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?
- 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.
by orlp - GameStop CEO was on CNBC and acted like a total dick the entire time after they asked him how financing would work for this deal [1]. It appears that he's upset that Squawk Box previously stated that GameStop is a bankrupt meme stock. This is probably one of the funniest CNBC interviews I've seen.by sakopov
- Long-time ebay seller here. I'm seeing comments floating towards the top that are essentially positing that the physical GameStop locations can be used as hubs where people can buy or sell their stuff in general (especially items that are 'pick-up only'). A pawn shop, basically.
Thing is, GameStop is, well, for videogames and videogame paraphernalia. It's not a general store. Doing this would turn them into a thrift shop, not a pawn shop, as people are trying to offload their carpets, desks, etc - bulky stuff.
I don't think this makes sense.
This does make sense when you consider the collectable market, another domain I'm involved in. Trading card games, specifically pokemon, have exploded over the last 5 years. GameStop is making a killing off of buying, selling, and grading these cards. Ebay is the primary marketplace to buy and sell those cards. There's also tax free havens ("Vaults") offered by multiple companies, grading service passthroughs, and scalping offered through ebay too.
Viewed through the above lens, that's what's prompting this offer, I think.
by octaane - Important background: https://investor.gamestop.com/news-releases/news-details/202...
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.
by pjc50 - The original shorting of GameStop back in 2021 gave them a bit of a boost back into the green. While people were doing the GME to the moon, GameStop made more shares to sell, and paid off a bit of its debts, I think it made about a billion dollars in profit, they're still struggling, but it helped prolong their life.
A friend of mine also pointed out and this made it click for me that it makes 100% sense, GameStop is setup as a legal pawnshop in every state. So a pawnshop buying out eBay makes insane sense.
This merger in theory could be good for both eBay and GameStop if they don't mess it up. Imagine being able to list your eBay items locally without having to have people needing to come to your house, or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
I could see this working out decently, assuming the CEO of GameStop doesn't mess it up completely.