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- Hacker News
- Many people noticed the math doesn't add up, e.g. in the CEO's interview here [0]. Am wondering if they are betting on the stock going up because of the news so they would then be able to fund the deal.
[0]: https://www.businessinsider.com/gamestop-ceos-awkward-interv...
by Iolaum - I think Ryan handled that badly because he didn't believe the question was serious.
They're offering 50% cash and 50% stock. At an eBay valuation of 56B: 20B of cash will come from their creditor, TD Bank. 8B will come from GameStop itself. 28B will come in the form of stock from the resulting entity, which will own eBay and presumably have a valuation north of 56B.
The resulting entity may end up having 50% or more of it's equity allocated to the existing eBay shareholders. This is normal for a M&A where a smaller company buys a larger one.
by ball_of_lint - CNBC Interview with Ryan Cohen:
- This was so hard to watch. "Half stock, half cash" is such an insane shallow level of detail provided for a 55.5 billion takeover.by elAhmo
- I see praise on Reddit (by GME stockholders, of course) saying that this makes him appear like some tough rebel standing up against the evil mainstream media... but I'm really not seeing it. To me it seems like a very tired (inebriated?) guy in a leather jacket who can't comprehend or answer a very basic question. Is this what passes for being a good CEO these days? I'd expect them to be able to at least come up with a vague response instead of claiming they can't comprehend that one number is bigger than the other.by pesus
- 2021: a Reddit short squeeze kept GameStop from going under. 2026: GameStop is bidding $55B for eBay, a company 4x its size. If it lands, this might be the strangest full circle moment public markets have ever produced.by aykutseker
- Is it still riding the meme stock wave or has GameStop made a turnaround?by doginasuit
- Another interesting observation to me is not that Gamestop was able to go from this full circle moment but rather the fact that Reddit has such influence that it was able to create the conditions which led here.
If Gamestop is the king, then reddit was the king-maker.
- I believe ebay should put itself up for sale on ebay instead.by seydor
- Oh, the GMV bump would mean a nice bonusby itomato
- GameStop would buy it and then not even pay, then eBay would be like wtf now I have to relist myselfby traderj0e
- Auction or "buy now" with price suggestion?by TonyTrapp
- 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 - Gets paid compensation in stock. So if shareholders lose value, he does too.by v4dm
- 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 - Minus fixing + selling costsby dgellow
- 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?
- > Is it too much to ask the Hacker News commentariat to do one quick search
Are you new here?
by petesergeant - Speaking as someone who used to know absolutely nothing about the world of high finance, yes, it is too much to ask.
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.
by i_think_so - But if it all goes sour nobody will be held accountable and two not one company are ruined.
I don't see how such leveraged acquisitions should be legal.
by sschueller - >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?
A quick review of the comments here would have demonstrated that it is.
by protocolture - Example from quite some time ago: Avast buying AVG. The value of AVG was around twice that of Avast.by rplnt
- I imagine the vast majority of us do not have a problem understanding smaller companies can buy larger ones. Most of us are just incredulous that anyone is taking GameStop, especially Cohen, seriously.by Forgeties79
- I see a single comment mentioning it is impossible. No sign of a collective declaration. I think you’re overreactingby dgellow
- There’s one comment as of the time of your post that makes this assumption - you could have replied to them directly.by lijok
- 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 - man, those GME bagholders are gonna love diluted shares.`by cyanydeez
- It’s wild to me that you believed that they would make an impossible offer.by solumunus
- why 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.by notepad0x90
- Both 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.by dlcarrier