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GameStop makes $55.5B takeover offer for eBay

bbc.co.uk

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Re: GameStop makes $55.5B takeover offer for eBay

#671

Post by vkou »

greycol wrote: post #576
gruez wrote: post #430

Earlier quoted context omitted.

>you're still personally on the hook for any post-foreclosure deficiency judgment Depends on the state: https://www.financialsamurai.com/non-recourse-states-walk-aw... >both by shielding the PE fund from debts and the use of bankruptcy and restructuring of the acquired company to discharge liabilities, including those from litigation. Who's extending credit to these companies? Individuals can do something similar by…

The people doing the lending can still make a profit. They get their interest payments and have a secured debt against the company. I.e. If interest and repayments until time of bankruptcy + liquidation of assets at bankruptcy is more than you'd get investing elsewhere at lower risk it's still a good investment. It's the other stakeholders (employees/community/unsecured debtors) that lose out.

The employees and the community are irrelevant in our society. The owner of capital decides what to do with that capital. You don't get a vote.

Re: GameStop makes $55.5B takeover offer for eBay

#672

Post by matwood »

itsmek wrote: post #621
matwood wrote: post #277

Earlier quoted context omitted.

SVB was not bailed out. Depositors were made whole (as they should be), but shareholders were completely wiped out (as they should have been).

Eh, they were kind of bailed out in that uninsured deposits were made whole. Not saying they shouldn't have done it (fighting contagion is like fighting fire, earlier is prob better and potentially cheaper in the end if your confidence bluff succeeds) but "bail out" is a flexible enough term that electing to cover uninsured deposits at the expense of uninvolved parties feels like it qualifies to me. Plus it has some…

“They” in your sentence is not SVB. Depositors who put money in an accredited bank should not have to worry about bank runs. Risk free banking for depositors is a cornerstone of the US economy.

There’s also no moral hazard here - the shareholders, equity partners, and debt holders were correctly wiped out.

Re: GameStop makes $55.5B takeover offer for eBay

#674

Post by protocolture »

manwithnoplan wrote: post #25

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 i…

>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.

Re: GameStop makes $55.5B takeover offer for eBay

#675

Post by __Joker »

pseudosavant wrote: post #632
fasteo wrote: post #228

Earlier quoted context omitted.

>>> should-be-illegal process of putting debt on the acquired company's balance sheet This is a basically a leveraged buyout (LBO). All private equity works this way. Yes, it should be illegal, or at least heavily limited. I highly recommend this book: "Plunder: Private Equity’s Plan to Pillage America"

I've been through an LBO before, my first thought when I saw this news was: so eBay is going to have to pay interest on a $50B loan now? eBay had $2B of net income in the last year. That might get them half-way to paying their annual interest payment if this deal closes. Get ready for the inevitable layoffs to cover that interest payment.

Just curious.

If there is iffy interest coverage for the debt and assets might be a stretch to cover (principal + interest), why will someone sponsor the debt here ?

Also, rates seems to be high, at least compared to recent history, to be favorable for this kind of LBO.

Re: GameStop makes $55.5B takeover offer for eBay

#676

Post by dgellow »

blobbers wrote: post #608

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 K…

Minus fixing + selling costs

Re: GameStop makes $55.5B takeover offer for eBay

#677

Post by panick21_ »

airstrike wrote: post #420
panick21_ wrote: post #91

Earlier quoted context omitted.

Is there anywhere a good breakdown of these leveraged acquisitions. Like a video or something that breaks down how that exactly works and why its legal and why the acquired company goes along with it. Its seems like such a strange mechanism. And the history of it.

Why would it not be legal? You can take out any loan, so long as the creditor believes in your ability to pay it back with interest, which informs how it gets priced. This is basically Finance 201 and everyone is up in arms ITT

But if that loan is used to basically acquire, or rather help another company acquire the company with the debt? So basically creating debt to facilitate mergers. But to be honest I don't fully understand all the financial engineering.

Re: GameStop makes $55.5B takeover offer for eBay

#678

Post by imtringued »

xnx wrote: post #638
nyeah wrote: post #244

Earlier quoted context omitted.

It's still an LBO, in effect borrowing against the target to get control of it.

Is that bad? No one is forcing the lenders to make that bet, and the lenders can lose money if the acquired company can't pay back the loan.

You have a company "funded" with its own equity and now you turned it into a company exclusively made out of outside capital and an obligation to realize the terms of said outside capital.

Before, you could have had bad years in-between the good years, now you're only permitted to have good years and by good years I mean years that honor the financing terms.

When you understand this, you realize that functionally speaking, nothing has changed really, other than that the cost of financing has gone up significantly, since the company can't rely on its own equity anymore. Now the company can no longer earn what it currently earns, it needs to earn that plus some. Hence the deal was nothing but a burden to the acquired company.

The previous owners realized the value of their shares and don't have anything to complain about. The new owner acquired control over the company they wanted. So who is left to carry the burden? The employees and the customers.

Re: GameStop makes $55.5B takeover offer for eBay

#679

Post by repelsteeltje »

jamesfinlayson wrote: post #665
repelsteeltje wrote: post #26

Earlier quoted context omitted.

> 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.

I've been told that Australian company Wesfarmers fanatically avoids synergies when acquiring companies so that if the time comes to cast it off, there's no painful separation of a bunch of shared systems/departments/real estate etc.

Not saying synergy is a dirty word, always. It's the assumption that there is a lot of overlap (which rarely materializes) and that assimilation or merging has no cost. In practice, company cultures are rarely aligned (the merger wasn't conjured by employees, they weren't even consulted) and frustrated talent leaves. Time is lost navel gazing.

Synergy (i.e.: cost reduction) looks great in Q3 balance sheet, but in the mean time intrinsic company value has decreased. The long term prospect isn't so great.

Re: GameStop makes $55.5B takeover offer for eBay

#680

Post by solumunus »

Forgeties79 wrote: post #441
solumunus wrote: post #417

Earlier quoted context omitted.

Ryan Cohen doesn’t even take a salary. I guess that’s extremely notable then?

As of a few months ago yes he does not take a salary anymore and he has actual skin in the game that could pay off in the tens of billions. Taking $0 is unusual but not unheard of (Musk I think does this too) and it’s very common for CEO’s to make $1mill (or even less) and have like…80%+ of their compensation tied to performance metrics/stock options. There are a lot of caveats to saying “he takes no salary.” It soun…

It's not "as of a few months ago", he has never taken a salary as GameStop CEO.
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