News just broke about GameStop sending an unsolicited bid for GameStop for $56BN or $125 per share, which is a huge premium of its current share price in the 20s. Looks like GameStop wants to fully transition into eCommerce after being on the decline for a couple of years. What do y’all think of the offer?
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Quick thoughts this afternoon
Doesn’t seem like it’s going to close. Less of a chance than the Netflix deal. eBay shareholders probably see GME trading at a $10bn market cap with $9bn of cash implying that the enterprise itself is worth only like $2.50 a share based on current market prices. That would mean to fund the stock portion of the deal ($62.50 or half of the $125 offer price) they would need like 25 shares of GME per eBay. eBay would effectively be the surviving entity and own the go-forward merged company.
That said Ryan wants CEO and probably a lot of operational / voting control or another like 10% ownership stake like he has with GME. I highly doubt he would enjoy working for .01% of the company or he is just playing games with his comp package which is based on GME market cap regardless of per share value or any other fundamental thing. That would imply maybe he just takes his $1bn payday and leaves.
The current deal looks like it would be eBay just saying, okay we are going to pay $10bn to hire Ryan Cohen as our CEO for him to rip out $2bn of costs and try to compete with Amazon using GME retail stores as Amazon Warehouses / physical showrooms for eBay products.
Seems like a tough sell.
That said, this could be a good practice run for Ryan / GME and maybe they end up parlaying into a smaller acquisition of another GME type company (I.e a more legacy tech-y name that is still underperforming today). eBay had its time when maybe this made sense but it seems like last few years it’s done well and doubtful that shareholders want to sell for only like $60 cash and the rest in a VC investment in Ryan Cohen. Just a thought. Maybe if he finds a way to up to it to $100 cash or $130 cash and the rest in stock and maybe he is not the CEO but like the VP of growth or something like that this deal could happen.
But he probably would be better served going after some company like PYPL (funny enough an eBay spin off that now has talk of its prized asset Venmo being bought by sponsors). I could see Venmo being traded to a sponsor or Stripe or something for a lot of its market cap and then the remainder of PayPal going to GME allowing Ryan to hit his Market Cap pay ($20bn market cap for GME) and trying to find a way to grow a combined GME / PayPal. Not sure if PayPal has any strategic fit or desire for Ryan / GME but just the first example idea that came to mind.
Good luck all. Cheers
How does this even work? Excuse the naïveté, but genuinely confused how the math adds up. GME market cap is ~$10B, plus the $9B they have on BS, plus the ~$20B from TD only adds up to ~$40B. How can they possibly pay $50B+?
Market cap is (current shares outstanding x market price per share). That is $10bn. That’s tied to CURRENT shares outstanding
Ryan mentioned that GME can issue NEW shares. It’s like a government printing more currency. With those new shares he can give them to eBay shareholders are payment.
I hope that helps
Its a bit circular. You can almost think of it like Ebay shareholders paying themselves. The effective premium is a lot less than the headline because the assumed GME stock consideration is so dilutive Ebay will be the vast majority owners. So you can issue a lot of stock to make up the difference and the secret is its not worth that much because at a certain point you as an Ebay shareholder are just footing the bill. The look-through premium on the deal is like single digits to Ebay shareholders, not the 45% quoted
Also maybe it was just me but it looked like RC hated being on CNBC and was only there due to like court order or his lawyers / bankers or whoever telling him he needed to. It sounds like he would prefer to have just done a Reddit live and chatted with his shareholder base there. The eBay/CNBC crowd doesn’t seem to be one he really enjoys speaking to or helping. All the more reason I think this deal won’t go through. Cheers
How does advisory work here in a takeover situation? Since GameStop sent out an actual bid did they solicit an IB for the actual bid or did they just shoot their shot. If it’s the latter at which point do they get advisors?
Judging by their proposal deck I suspect there was no "real" advisory team involved...
My guess is that Ryan doesn’t have advisors unless you count TD as an adviser. I think he prides himself on being lean and doing things himself. Plus saying he cut $800mm of cost out of GME then going to spend at least a few million to pay some billionaire banker for advice doesn’t seem like a good look. His shareholders probably hate Wall Street and every bank on it. Maybe TD is acceptable because it’s more mainstreet and wasn’t seen as causing the financial crisis that led to the GME revenge short squeeze.
It’s one thing if TD is also advising him because he is really just using them for the $20bn loan. Maybe they are advising him but it’s kinda a no lose situation for TD. They get some free good press that they are a player in M&A and high finance. They potentially get first lien paper on eBay (with plenty of coverage) at an aggressive rate probably. And now they have a tighter relationship with a guy who has basically said to the market he wants to go out and spend $10bn+ to buy something.
Peace ✌️
Interesting, I’ve been having a misconception that high level decisions in the M&A market are more structured and representative. I didn’t know that a few key players hold such power to decide the nature of a transaction based on previous personal relationships. I guess this is why IB is such a people centered job at the higher levels. Good to know thanks!
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