Comment by hdgvhicv
3 hours ago
Wouldn’t that debt knock down the market cap as much as the value
Otherwise take out a $20b loan and put it in the bank. Assets increase $20b, job done.
3 hours ago
Wouldn’t that debt knock down the market cap as much as the value
Otherwise take out a $20b loan and put it in the bank. Assets increase $20b, job done.
There is precedent for this kind of trickery being played.
For example, Honeywell acquired Garrett AiResearch, a well known manufacturer of turbochargers for combustion engines, through a series of mergers.
Later on, it loaded them up with debt (over $1.5 billion, mostly asbestos related indemnity obligations from other parts of the business), before spinning them out as an independent entity again. Two years later, Garrett filed for bankruptcy claiming it was succumbing to the unsustainable debt burden placed upon it by its former owner.
So you mean...marrying someone but transfer all the personal debt to the others, then divorcing so that I have no responsibility whatsoever? Not even an obligation to settle for the debt just like disappeared through an expired relationship?
Is there a legal term for this kind of restructuring of debt?
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Welcome to late stage capitalism
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I believe this is what they call the 'Texas Two-Step'
Perplexity wants to buy Google Chrome vibes.
They are paying half in GameStock equity. They will issue new shares so they will buy Ebay of $55bn, but add only $20bn debt.
Its good for GameStock management who will end up running a much bigger business. https://investor.gamestop.com/news-releases/news-details/202...
Game Stock management is essentially claiming that they can run Ebay better than the current management so Ebay shareholders will end up better off by selling to Game Stock: they get some cash and shares in a business that will be mostly a better run Ebay. Very possible bad for GameStock shareholders who will end up with a smaller stake in a bigger business.
Well, his argument is that he can remove inefficiencies in the combined company.
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.
He can argue that. But to me it seems more likely that culture and market demands are so different between the two companies that sharing any substantial resources would be to the detriment of at least one of the two halves. And more likely detrimental to both
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
> to a successful business
Maybe from a brick-and-mortor store to yet another private equity fund whose continued existance comes solely from debt and merger trickery.
the only benefit I can see is some kind of eBay pick up and verification scheme where sellers use the gamestop locations to send their products and buyers go theere to pick it up. That would basically create a "this is garbage feedback" that could cleanup some of ebay's long standing problems in trust.
9 replies →
>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.
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.
I don't think this is a serious assessment. For years, the core business of both companies has been facilitating the flow of used goods. Gamestop has moved strongly into collectibles recently, with a partnership with collectible grading firm PSA and the introduction of (essentially) lucrative trading card lootboxes, whereas eBay has capitalized on the same expansion of the collectibles market with new live/flash auction features.
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).
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> Well, his argument is that he can remove inefficiencies in the combined company.
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.
"How do you make money? Spinoffs, split-ups, liquidations, mergers and acquisitions." - Mario Gabelli
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.
That is a massive “if”
Depends on how market cap is defined for the purpose of the contract. Typical definition is just against floating shares in the market * share price. Debt doesn’t factor in at all except in so far as it will influence investor confidence -> share price.
That said: conceptually it’s not an awful fit for GameStop. In so far as video games discs and cartridges were the main disposable belonging i had as a kid and the main target for new purchases, Funcoland was (later to become GameStop), if you squint your eyes, a brick & mortar eBay scoped to only video games. If you’d been an SV startup at the time pitching the eBay concept you could have said “it’s like funcoland, but online and for anything and also lets people sell peer to peer “