GameStop's Offer to Buy eBay is Absurd

0:00 GameStop offers 56 billion in value for eBay,

0:05 but struggles to explain how it'll gather up all that value.

0:11 Uh, on May 4th, GameStop,

0:13 because they try to use the force to make this happen, I I don't know, whatever.

0:16 Uh, GameStop made an entirely unsolicited $56 billion

0:20 offer to buy eBay at $125 a share.

0:23 The offer letter stipulated that the amount would be paid half in cash,

0:27 half in GameStop stock.

0:29 GameStop's operational/ strategic plan was that its roughly 1,600

0:34 US retail stores would become eBay drop off intake,

0:37 fulfillment, and live commerce hubs, which actually sounds kind of smart.

0:41 Uh, with CEO Ryan Cohen promising $2 billion a year in cost cuts,

0:47 including 1.2 billion from eBay's marketing budget alone.

0:51 The bid seemed weird because the market valuation of GameStop

0:55 is around 11 billion while eBay is roughly worth $48 billion.

1:02 Is this is this like me um you know offering to uh

1:08 I've got my uh I've got my float plane shirt on here.

1:11 Okay.

1:11 Is this like me offering to buy YouTube?

1:14 You know like this isn't even a merger.

1:17 I think the scale isn't even close to be honest.

1:20 But you get what I mean, right?

1:21 I think they're a lot closer, but

1:23 they're the smaller company and they're not even offering a merger of peers.

1:27 They're like, "We're going to acquire." What are you even talking about?

1:30 Anyway, sorry float plane trying to buy YouTube's toe.

1:35 Um, yeah.

1:37 I mean, there's a lot of funny stuff with this.

1:39 I I think it's literally just a stunt, but we'll we'll we'll get into that.

1:43 uh about why do you why why can't why are you feel

1:46 so compelled to spoil the punchlines for things Luke can't help

1:49 but there's so many good reasons why and people got

1:51 to absorb it as we go through about 9 billion

1:54 of the which has me interested in if GameStop's valuation

1:59 includes their cash but anyways about 9 billion of the cash

2:02 for the offer would come from GameStop's war chest with the rest

2:06 being raised through a debt instrument from TD securities uh

2:10 a subsidiary of TD Bank provided a highly confident letter indicating

2:18 a potential commitment to provide approximately 20 billion of the cash.

2:23 Um half of the offer in debt financing what?

2:30 Okay, I'm a little bit lost here.

2:31 But anyways, um yeah, it's it feels like Sam Alman being like, "Yeah,

2:35 I'll buy all the RAM." It's like that level of like

2:37 I don't I don't think they actually technically have to do it,

2:39 but they've said that they probably will.

2:42 Um, Cohen went on CNBC's Squawk Box where

2:45 the hosts flagged that the value of all

2:47 of GameStop's stock is just over 11 billion

2:51 and half of the stock um half of the stock,

2:55 half of the acquisition offer would require about 28 billion stock.

2:59 Yeah,

3:00 basically there isn't enough equity or enough cash to make this make sense.

3:05 And half stock half cash also doesn't really make any sense.

3:08 And if we go check out uh GameStop stock and we look at the last five days,

3:16 I mean, it even went down.

3:19 So, it's worth less today than it was uh when a month it's it's up.

3:23 Yeah, it's down 4% because because people saw this and were like, yikes.

3:27 Uh which is kind of funny.

3:29 Um yeah, the the the the CEO apparently just kept on saying when asked like,

3:36 "How does this make any sense?" like where are you getting all that value from?

3:40 He just kept saying uh half cash, half stock.

3:43 Uh and then saying it's on the website.

3:44 Go check it out there.

3:45 It it it gets explained on the website.

3:47 Um yeah, amazing.

3:50 I missed this part.

3:50 He eventually told the host, I don't understand your question.

3:54 It's like, dude, okay, sorry.

3:58 Carry on.

3:59 He was framing the I don't understand your question

4:01 as if there was enough stock and cash available.

4:06 Therefore, the question didn't make any sense, but clearly there isn't.

4:11 Um, fantastic.

4:13 Morgan Stanley analysts then piled

4:15 on with a research note calling GameStop and eBay

4:18 fundamentally different businesses with no real overlap

4:21 and noted that if the deal somehow closed,

4:23 it would be the largest leveraged buyout in history.

4:27 Then on May 6, Cohen created a new eBay.

4:29 This is my favorite part.

4:31 He created a Cohen, the CEO of GameStop,

4:33 created a new eBay account under the username Ryan5050.

4:38 You know, 50 cash, 50 stock.

4:40 Um, presumably a nod Oh, yep, there it is.

4:43 Presumably a nod to the halfcash, half stock split.

4:45 And then started listing personal items

4:47 in his words to help fund the eBay acquisition.

4:51 uh including if I remember correctly some socks and and other things.

4:56 Um, Frank Sadi Sifali, Safali, I don't know, um,

5:04 of the Video Game History Foundation then flagged on Blue

5:07 Sky that several of Cohen's listings appeared to come from

5:11 the the Game Informer vault,

5:13 which housed decades of rare gaming memorabilia that GameStop

5:17 kept after shutting the Game Informer magazine down.

5:21 Okay.

5:21 Yikes.

5:22 Uh then late that same night, eBay suspended Cohen's account,

5:26 citing concerns that his activity um was was putting the eBay community at risk.

5:31 As far as my understanding goes, they have reinstated his account.

5:35 I don't think that's in here.

5:36 Um, analysts have pointed out that the whole thing likely comes down

5:40 to Ryan Cohen trying to trigger a performance gate in his compensation package,

5:45 which would unlock 35 billion in potential stock options if he increases

5:51 the company's market value to hundred billion

5:54 and achieves 10 billion in cumulative ebida.

6:00 You know what's funny is that is so

6:02 much better analysis I guess of what he's doing.

6:07 See, I thought this was as simple

6:08 as GameStop hasn't been in headlines enough lately.

6:12 I need GameStop in the headlines so that people

6:16 like pump it as a meme stock again.

6:19 I like I was thinking like 3D chess.

6:22 That's like that's like 4 D chess.

6:25 So if I need to reach a revenue target, I just go out and I borrow enough money

6:34 to buy a company that already has that much revenue.

6:40 It's brilliant.

6:41 I don't think I think if anything leaking that like that was the goal might have

6:46 been part of the 3D chess because I don't think this was ever going to happen.

6:51 Um,

6:51 well, no, it was it was never going to happen.

6:53 But like maybe he is del I mean we have

6:56 no idea how much ketamine the average CEO is on, right?

7:00 So like maybe in his mind this is serious.

7:08 You should just you should cold call Taran and ask him.

7:14 Oh, hey Lionus.

7:14 You need a plug or what?

7:16 We're we're concerned that you're not taking enough ketamine.

7:18 Um, all right.

7:19 I'll ask him.

7:20 We're We're looking at We're looking at LMG's trajectory

7:24 and we're thinking you might need to take more ketamine.

7:26 I I forgot where I worked and that he would actually do that.

7:30 Oh, I I I knew he was going to do it.

7:32 What have I done?

7:34 Hey, how's it going?

7:35 Uh, hey, you're live on the WAN show.

7:37 Hold on.

7:37 I'm just trying to figure out where the speaker hole on my phone is here.

7:40 Uh, can can you guys hear him?

7:41 Okay.

7:43 Yes.

7:43 Yeah, he's coming through.

7:44 Okay, you guys got him.

7:45 Um, so we're just having a a conversation right now um about sort

7:52 of like CEOs and and their typical

7:55 ketamine consumption and we were just wondering like

7:59 how much ketamine do you consume?

8:02 I've had no ketamine so far.

8:04 I have asked doctors for ketamine and they said no.

8:08 Really?

8:09 What did they explain why they said no?

8:11 I mean I if this is getting too personal then

8:13 feel free to to to nope out but like I I

8:18 like is this for recreational use or is there a medical condition?

8:21 I'm like recreational and then that's when they Okay.

8:25 All right.

8:25 Understood.

8:26 Um that's actually really Oh, you know what?

8:29 Chat's got a question for you.

8:30 Um Denrix asks, "Did you tell them that you've been diagnosed with CEO?" Oh, no.

8:38 I haven't.

8:39 Is that a Is that a real condition?

8:41 Well, that's what we think because because of how how

8:44 how people are CEOs and are being treated with ketamine,

8:49 we assume that that was a causation relationship rather than just a correlation.

8:54 Can I ask can I ask questions as well?

8:57 Yeah, absolutely.

8:58 Absolutely.

8:58 This is an open This is a safe space.

9:01 Oh, when I'm at work, does it seem like I'm under the influence?

9:08 Um, thank you everyone.

9:09 Uh Taran Taran Tong, CEO of Linus Media Group.

9:12 Bye Taran.

9:13 Uh I'll see you next week.

9:16 Um wow, what a great what a great conversation.

9:19 That was tremendous.