alt Hacker NewsWouldn’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.
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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.
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 “
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.