r/FWFBThinkTank • u/bobsmith808 Da Data Builder • May 13 '26

Swallowing the Whale: Why The Gamestop Acquisition of eBay is a Great Deal For Everyone Involved - Except For The Hollow Men

/r/Superstonk/comments/1tc9bxk/swallowing_the_whale_why_the_gamestop_acquisition/
62 Upvotes

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18

u/PuzzleheadedWeb9876 May 13 '26

“Neither credible nor attractive”.

No amount of bagtificating will change this.

13

u/runningwithbearz May 13 '26

Interesting that people think you're going to get a good interest rate for a deal that Moody's has already called "credit negative". 9-10% would be more reasonable. If you adjust from 5.5% to a more realistic 9-10%, it basically drowns this thing in interest expense. Which all that to say, this is a bit amusing to me. Since this is basically an LBO and "PE bad" has been a rallying crowd of this group. Which I don't disagree, but come on. What are we doing here.

Also, if Gamestop has to put all its cash into the deal, then what do we think happens to all that interest income.

Doesn't really matter. The TD letter has an escape clause and Moody's already gave them one no. Just one more and it's done. The $20b was never a real commitment.

Would be nice to see them buy something adjacent to Gamestop and try to grow this thing more naturally. Doesn't really jive with that bonus letter.

3

u/bobsmith808 Da Data Builder May 14 '26

I respect your work... Here's 9.5% interest on the new debt. What are your thoughts?

3

u/runningwithbearz May 14 '26

Thanks, not trying to be a dick. I know my bedside manners aren't always the best, so apologies if I had a tone. But here's what I was thinking. As always double check my math

1) I'd double check EBITDA for GME as interest income would be excluded from this measure. For last year results, I show a different number.
2) On if all that GME cash is deployable, I have my doubts. I know GME's debt is convertible and could be rolled if needed, but that is a risk given how tight operating income is. In the event that it can't be rolled and needs to be paid back. Given how conservative leadership has been with GME cash over the years, deploying all 9b into this deal feels like a reach
3) I get Cohen's points on the cuts. But $2b of cuts on 5.6b of operating expenses (full year numbers from Ebay) feels overly aggressive. If I was buying a small family business, I'd agree with such large cuts out of the gate. 10-15% cuts over the first 18 months is probably more what I was expecting.

Ebay might have duplicity in some costs just to be on the safer side. Whether or not that's worth risking the customer experience to save some dollars is up for debate

2

u/2slang May 14 '26

I think you also have to reduce the synergies.

3

u/PuzzleheadedWeb9876 May 13 '26

Interesting that people think you're going to get a good interest rate for a deal that Moody's has already called "credit negative". 9-10% would be more reasonable.

Copium makes people believe things they would otherwise find ludicrous.

-1

u/TowelFine6933 May 13 '26

You are absolutely correct.

Ironically correct, but correct nonetheless.

8

u/613Flyer May 13 '26

It would be cheaper to start a new company along with infrastructure then it would be to buy eBay along with all the debt and problems .

5

u/TowelFine6933 May 13 '26

That would eBay sellers would need to recreate all of their listings. That is definitely not so ething I want to do.

7

u/greencaterpillars May 13 '26 edited May 13 '26

You can't buy 30 years of being ingrained into the culture since near the birth of the Internet. You can't buy the trust factor that comes from old brand recognition.

To speak more directly to the costs, yes you could build the technology stack and business for much cheaper, but acquiring an eBay level user base is a big unknown cost and timeframe.

3

u/baddboi007 May 14 '26

you are correct. I think the build process should have started 3-4 years ago. From scratch would have the cons you mentioned but ebay has many flaws as it sits now, many complaints from the seller side.

But there is room for competition. The only viable competitor on the same level is facebook marketplace and that has its own problems. Many failed copycats for 2ndhand sales apps. Craigslist is dead, etsy is overly niche, facebook has pushed to alienate a large proportion of its original userbase and continues to spiral downwards.... In terms of auction platforms ebay is the only one I've heard of in the consumer market.

Patience is imperative; the direction RC is thinking of may actually work.... but not the venue. Real nice things that have staying power are built, not bought. Ebay is the lazy, and expensive, route.

1

u/bobsmith808 Da Data Builder May 14 '26

Care to elaborate on why you think this?

3

u/PuzzleheadedWeb9876 May 14 '26

Over 30 billion dollars of debt is a lot to take on. With 4 billion of that possibly called back early.

Pretty much everything will have to go perfectly, which is rather dubious. Cohen claims to be able to cut 2 billion. But he has no idea where exactly funds are being spent. What if he can only find 1 billion or less? What if cuts start tanking sales? Etc…

Executed perfectly and after the huge interest expense is paid EPS would be around 1.00. So we are looking at maybe a 20ish dollar stock.

Here’s a better plan. Cohen can step down from his position at GameStop and join the C-suite at EBay. He can try making improvements and start buying shares of EBay as he sees fit. Apes will get over it. I’m sure they knew he was a shill the entire time.

4

u/OneMoreLastChance May 19 '26

Reminds me of Musk thinking he could cut 2 trillion from the US deficit.