The original shorting of GameStop back in 2021 gave them a bit of a boost back into the green. While people were doing the GME to the moon, GameStop made more shares to sell, and paid off a bit of its debts, I think it made about a billion dollars in profit, they're still struggling, but it helped prolong their life.
A friend of mine also pointed out and this made it click for me that it makes 100% sense, GameStop is setup as a legal pawnshop in every state. So a pawnshop buying out eBay makes insane sense.
This merger in theory could be good for both eBay and GameStop if they don't mess it up. Imagine being able to list your eBay items locally without having to have people needing to come to your house, or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
I could see this working out decently, assuming the CEO of GameStop doesn't mess it up completely.
"I think it made about a billion dollars in profit"
It raised over a billion dollars of capital (i.e. issued shares in return for cash). It did not make a billion dollars in profit (and has never had a year when it did).
Total revenue declined because they closed stores. But income went up because those stores were losing money.
They also made a lot off of interest on their cash, but that is going to get cut by about 30% if this goes through, as the combined cash position Gamestop has access to declines from 9 billion to 6 billion. Or so I've heard.
You can't normally describe it as profit because stocks by rule trade at a fair price, but it's surely reasonable to consider in this case GME making a profit from the squeeze given they were selling a good well above fair acquisition price.
no, they issued more stock. stock is a claim on corporate equity, ie the delta between assets and liabilities. existing stock holders' claim to equity gets diluted when this happens, but share prices will often not be effected proportionally, making it appear the company has "made a billion dollars" when in fact they've just split the same pie into smaller pieces and managed to sell it at the same price. ryan now seems to think he can issue shares to acquire ebay, which will be much harder than fleecing retail.
The TLDR for people who don't intuitively understand why: existing shareholders are diluting their stake in the company by issuing new shares and getting money for those new shares. It's simply selling part of the company. Not profit.
Yes, in 2021 GameStop did sell shares to raise cash in a dilutive way. [1]
No, that is not being treated as profit or revenue.
Gamestop had ~418 million in profit in 2025. [2] A fraction of that profit does come from interest income. Ignoring that (say to value the business separate from the cash) they still made ~110 million in profit.
In my personal opinion (not financial advice) Gamestop with the cash it has today is a much more attractive investment than without. If you have worries about an economic downturn, it's a hedge. If you worry about GameStop being able to maintain it's current revenue/profit or volatility, it's runway. There's a variety of ways it reduces the risk of an investment.
>A fraction of that profit does come from interest income.
More than half of it came from interest income.
Gamestop has been unable to grow revenue since Cohen took over, failed initiative after failed initiative. The only thing saving them is their meme stock nature and a legion of people willing to throw good money after bad allowing them to dilute shareholders to build a warchest.
They have increased profit by closing something like 50% of their stores but you can't grow a retail company by constantly closing stores at some point you have to find a way to make the stores more profitable and in 5 years with tons of different attempts they've not found that. Revenue is down almost 50% in the past 3 years.
Having a pile of cash doesn't matter if you have a leader who has no good ideas for how to invest it to improve returns for shareholders, all it does is allow you to die for longer.
Tightening your belt is a good thing. No disagreement there but it has a hard limit. You can't just keep tightening the belt and growing profit, at some point you have to start revenue expansion again and from what I've seen Gamestop has no way to do that.
At $2.50 they had massive amounts of debt they couldn't service and a very real chance of going out of business. Then through pure luck they became a meme and were able to extract $10b from investors so of course they are worth more today. There is no growth story though so as meme investors get bored and move on it will move back down to it's asset value unless they find a way to grow again.
The meme investors can stay irrational long before gamestop gets a growth story. If they haven't given up on their get rich quick scheme that's lasted over five years now, I really don't think they're going to jump ship now.
The sad part is that gamestop is offering 55 billion, yet only has 9 billion in cash. The only way they come up with that much capital to buy ebay is to dilute the existing shareholders to a point that "to the moon" will just be moondust.
Not growing revenue would be one thing, they're shedding revenue at pace - 50% decline since 2020.
> Shareholders seem to agree
First, it's a meme stock. The market can remain irrational for long periods. Another way to analyze it - almost all of the market cap of ~$10b is the $9b in cash. The shareholder pricing tells you they value the business at it's cash assets.
Gamestop's business of physically selling video games, consoles, etc is a dying/dead industry. Nothing can change the trajectory of the market that is almost completely disappeared.
It's a Blockbuster or Tower Records, a dead business running on fumes and memestock valuation.
Well hey, what do you think about them buying eBay? eBay seems to think a lot of the value is in verification - grading cards, authenticating watches, shoes, handbags. GameStop has a similar business in collectibles and could provide eBay with a physical footprint that would let a lot of that verification happen easier, in-store.
The verification stuff is minimal. That's not where eBay makes it's bulk of money but it's a reasonable growth area. There's a huge opportunity though for eBay or someone to tie several loose ends and concepts together and have a serious competitor to Amazon.
I honestly don't know anything about ebay these days to comment on them but many many people have tried to make a business of providing a storefront for ebay in the past and they've basically all failed so I don't think that bodes well for the main offering Gamestop has.
Also Gamestops verification business is not done in stores AFAIK. I'm pretty sure they've just partnered with PSA to allow you to drop off cards at stores but they are sent away to be authenticated. The stores don't really add any value for most people in this transaction and add a potential downside in that there are multiple reports of Gamestop store employees stealing cards handed over for grading.
Training retail employees to be proper verifiers seems like a huge risk and a huge cost since you need to train them up on how to handle everything where with centralised grading locations you can have specialists(think antiques roadshow).
Worth also pointing out though that if you can sell new shares above intrinsic value that is accretive to existing shareholders. Dilution isn’t always a bad word. (It’s bad for the people buying new shares.)
Yeah I'm also always confused whenever I heard that a company issues new stocks. Why would existing shareholders agree for that? If there's more comprehensive resources about this I'd love to read it.
Well, partly it's an audience thing. Hacker News has a lot of folks who work at tech startups, and if you work at a tech startup, dilution is nearly always a very bad word for you.
The main purpose of a funding round is for the company to sell shares and receive cash (e.g. to spend on marketing), not for founders to sell shares and receive cash (e.g. to spend on Ferraris).
(Sometimes, at the same time as a funding round, founders may also sell some existing shares to the new investors.)
Bubble? Yes. Ponzi? No. The latter requires some element of deception/fraud. Strategy Inc. (formerly MicroStrategy) was basically something similar. They had $x worth of bitcoin in a vault, but were selling themselves for $2x.
> GameStop is setup as a legal pawnshop in every state. So a pawnshop buying out eBay makes insane sense.
It doesn't though. eBay could easily set itself up as a legal pawnshop in every state if it wanted to. It doesn't because there's no advantage to doing so.
There are already third-party sellers in many areas who will take your physical merchandise and sell it on eBay in exchange for a cut. eBay doesn't need to enter that market, it's simply not profitable enough.
You're right that there's no real advantage to eBay buying a pawnshop conglomerate, but a pawnshop conglomerate buying eBay gets a massive advantage. They're already sitting on a mountain of used inventory, and at some point a lot of it will be thrown away because there are no local buyers for it. Having a commission-free way to offload that inventory would be huge for them.
Ebay commissions are not that high, 13.25% for most items.
The barrier to listing huge amounts of merchandise is not the commission, but rather the amount of labor it takes to list and price everything and pack and ship it and deal with refunds and returns for items that turn out to have problems. And how a lot of items are only economical to sell locally, because when you add in shipping costs it approaches the value of buying something new.
Buying eBay doesn't provide any kind of easy way to help offload inventory at all. The way inventory is offloaded in bulk is in bulk pallets sold at auction, where people bid on them and then do all of the grunt work involved in photographing and listing and packing and shipping. Which is a significant proportion of sales on eBay today. GameStop can easily auction off pallets of their merchandise if they want, today. In fact, there's a good chance they already do.
> Ebay commissions are not that high, 13.25% for most items.
13.25% isn't zero.
> The barrier to listing [is] the amount of labor it takes to list and price everything
GameStop has a surprising amount of technology around their pawnshop activities. My son traded in his laptop last month and they had him wipe it, enable developer mode, and plug it in to do automated tests and make sure they knew what they were getting. They're already doing the labor to price everything. They're not going to have people type up listings, they'll just automate posting off of their inventory system.
> when you add in shipping costs it approaches the value of buying something new.
They get to skip the shipping costs. You could choose to have them ship the item to a GameStop near you which would cost them pennies. This is an advantage of having stores in every city with a population over 50,000 in the US.
And a huge amount of the stuff that GameStop buys and sells is out of print. Buying new is simply not an option when you're talking about a game that was released 6 years ago only on physical media.
> The way inventory is offloaded in bulk is in bulk pallets sold at auction, where people bid on them and then do all of the grunt work involved in photographing and listing and packing and shipping.
There must be money in the margins here. Otherwise people wouldn't do it. GameStop has all the technological ability to cut out this grunt work.
I'm just saying, 13.25% isn't the barrier here to making this work.
And shipping things to a "GameStop near you" does not cost pennies, and most people hate having to pick up packages. The reason that can be cheaper for regular stores is because they're distributing from central warehouses to those stores anyways. If GameStop is holding inventory trapped in all these physical stores, shipping an item from one store to another is no cheaper than shipping it directly to the customer -- e.g. it's edge node to edge node, not central node to edge node.
Interesting discussion. Something it made me think about is trading cards or other items you typically might want to sell as graded items. If you’ve got a physical GameStop with the digital eBay footprint maybe you’ve got the makings of a nice little ecosystem for selling Pokémon cards, video games, antiques, and other items in an inspected condition.
But the brick and mortar distribution is hard to build and gives a structural advantage. As another poster pointed out, you could sell your items locally and not need to deal with shipping, communication with buyers and other stuff. It would reduce friction which might actually expand the marketplace significantly. I personally have multiple family members that throw stuff away because listing on eBay is too hard and pawnshops too sketchy
Why does it give structural advantage to own a bunch of dead mall and strip mall brick and mortar stores that have been on the verge of bankruptcy for well over a decade?
They haven't been on the verge of bankruptcy since they paid off their own loans. This deal will actually be the closest they've been to bankruptcy since like 2022, because they'll actually have interest payments to make.
There's something else going on. The other companies known for being meme stocks are doing substantially worse in terms of share price. AMC is below what it was before early 2021, down 90% from its high. That holds for most of them. Bed, Bath, and Beyond famously went bankrupt.
Meanwhile, yeah, Gamestop is down about 75% from its high. But it's also 2.5x its post-top low, and... um, about 24x its 2020 low. Go ahead and check. Makes at least some sense, when you understand that they stemmed an EPS bleed and turned it into a profitable company.
A sinking company buying a healthy company several times larger and more profitable doesn't make sense. The eBay board and shareholders would be crazy to participate in this fantasy. GME shareholders are already known to be of questionable judgment, so whatever they do is SNAFU. So, it's not surprising GameStop would try something crazy, what's surprising is anyone is taking it seriously.
Gamestop in Canada isn't owned by Gamestop in the US. They were also historically unprofitable so people might be in the stores but they aren't buying enough.
There's friction though, if the process is under one roof end-to-end, ebay can take 30-40% (15-20% today) of every transaction by just letting you dump your old stuff. Might even eat FB marketplace and CL.
Not exactly, the biggest annoyance with eBay (in my experience) is dealing with shipping, disputes and returns. If I could recover even 50% of the value of unused items without dealing with the ridiculousness of p2p transactions (flakes, tire-kickers, scammers) I'd do it in a heartbeat.
Don't pawn shops already solve this problem? Make your way there, dump your stuff, get peanuts for it in exchange (but might still be worth it if you truly don't need said stuff).
I regularly accept a 40% cut or more at “Hard Off” (a chain store that buys and sells used electronics in Japan). Why? Because I don’t want to deal with the hassle and risk of selling the items myself.
I’m able to bring in a box of items that I don’t use and are taking up space, and they pay me cash on the spot. It’s very convenient.
I think eBay buyers would also have more confidence buying from eBay/Gamestop than direct from other users.
Checkout the insane amount of money Goodwill makes because of people getting rid of their "junk". There are 151 independent Goodwill organizations and all of them have a CEO, usually making 6 figures a year.
"Goodwill Industries was established in 1902 and is widely known across the country as the place where we all donate clothing and household goods to help others."
That's the first sentence from your link. Clearly people don't treat this org, literally called "good will", the same as they treat freakin eBay.
I don't think this is true, because people are often willing to spend a bit of extra time to do something good, like make a donation, but wouldn't be willing to take that same time to make $10.
I would. I don't sell on eBay because it's a hassle to manage all the rest of it. So I end up taking it to a place like Half-Price Books instead and get hardly anything, but at least it gets out of the house. 30-40% cut would be a significant step up compared to what I get from those places.
Speak for yourself. There's a reason places like Once Upon a Child and their parent stores exist. There's even other entirely digital stores on the sell for pennies instead of donating market.
People regularly give businesses >50% cut to get cash immediately and this isn't even counting resellers who low ball people who don't know what they have.
I thought the point of eBay was to get rid of that middleman. Wouldn’t that be something eBay would have done at some point if they wanted to own a pawnshop? Not saying that cannot work but that doesn’t sound like a genius idea
Over time, eBay has become the middleman - with international shipping centres, basically escrow service with buyer protection, and rather high fees for promotion and of course, the actual sale. No middleman is something like Craigslist or FB Marketplace.
I interviewed at a place that had their own collectible card market, I think they partnered with eBay. But the whole service was that you would yield your valuable cards over to them and they would store them in a repurposed bank vault for safe keeping or to act as a seller. Cards that were like $1k or more.
They seemed to be doing really well esp with all the pokemon and MTG card crazes going on.
This is part of the value prop of TCGPlayer, which was bought by eBay. They're specifically a marketplace for trading cards. Like Amazon, sellers can keep their product and sell it through the site, they can ship their inventory to TCGPlayer to manage logistics, and TCGPlayer sells cards on their own.
eBay has also started doing strongarm middleman things as well.
If you list an item, it strongly "suggests" a price. Sounds innocuous, right? However, when every seller knows they would be stupid to list a product for less than the suggested price, that means that eBay is enacting a collusion process on their sellers to regulate prices for products sold on their platform.
I don't think this is illegal in any way, but it is bad for the buyers as it decreases the chance that they will get lucky with a purchase and ensures that all purchasers on the platform spend as much as they can afford to spend.
Next, as a seller, eBay presents you with an option to "promote" your product, for a fairly significant percentage of eBay's suggested sell price. (Last time I tried to sell something, they wanted $9.99 to promote an item expected to sell for ~$150, for instance). If you do not "promote" your item, then it is thrown to the bottom of the listing and may be filtered out when purchasers sort by "price low to high" as they often do.
I chose not to promote my item as I was just getting rid of it, (brand new OEM toner for a printer that normally sells for $200) and it got almost no views and ended up selling for $40, of which ebay took $7.50 for their cut.
I checked the other solds for the same product and mine was the lowest sold by almost $100 all seemingly because I didn't pay the racketeer price upfront.
I didn't care about the money, I was just getting rid of it, and ebay punished me for not playing ball their way while also losing out on their profits just to make a point with me.
If you don't eBay the ebay way you will suffer for it.
Speaking of which, eBay has started changing the number of results based on your search filtering, preventing purchasers from finding the specific thing they are looking for in exchange for something that is often more expensive and not quite right.
Try it yourself. Search for something very specific and then change your filters and see the number of available items increases and decreases based on how you search. I honestly would not be surprised if they were hiding the unpromoted less expensive more accurate item you are searching for from you in the expectation of inducing you to buy the more expensive item in the process.
Why would eBay do this? They make more money. It's pure enshittification. They charge the sellers to promote. They set the prices. They charge an insane percentage, something like 15-20% of the final sell price to the sellers, and they have made the platform hostile to its original purpose of being a bazaar for ordinary people to sell their old stuff to people that might want them.
Of course, they are still seller hostile, they protect fraudsters who buy expensive items and claim they are fakes or broken and return bricks, and they have strongarmed their customers into arbitration agreements in an attempt to prevent anyone from suing them to stop their anti-consumer practices.
Yeah, I got fucked over by eBay and will never sell on there again.
eBay let someone scam me out of $700.
I sold a Mavic 2 Pro drone with 5 batteries. The whole process was a mess. Scammer initially complained that it didn't come with a CrystalSky tablet that was in one picture (that was only added AFTER after he had bid already and asked to see Flight Logs, and was explicitly disclaimed as not being a part of the package, nor was it in the receipts I sent the buyer). After pointing out those details, silence.
Then, three weeks later:
"The batteries don't work. I want a refund."
"Batteries? Any of them? All of them?"
"All of them, none work. I want a refund."
Note that two of the batteries were less than 4 months old, still in warranty.
He then stated he wanted a refund of $800. For five brand-new batteries, that would only be $670.
No evidence was shown, despite multiple requests (like a video of a battery on a charger, or on the drone, failing to power up). I stated I'd like to get the original batteries back, as at least I'd be able to get them replaced under warranty or possibly repaired and recoup some of my money (I was skeptical there was -any- issue, but still, good faith). He "happily" agreed. I asked him to send me a message on eBay (so it was tracked and not avoiding their system) acknowledging that offering a partial refund was contingent on his sending me the batteries back and that he accepts me disputing the refund if not.
He sends a message indicating all of the above.
Refund is sent (for about $700, to include his return shipping costs).
Thirty-five minutes later, I get a message, "USPS says they don't ship damaged batteries, so I will not be returning them". (35 minutes? So what, you were just sitting around waiting for the refund, and then the very moment I sent the money, you jumped in your car, got to the post office, had this discussion, got home, and were able to send me this message? When your home address shows you about 15 minutes from the nearest post office?)
I then suggest we meet in person to exchange them (I live a few hours away, not convenient, but still, $700...). He umms and ahhs, "How will I be able to prove that I gave them to you in person?". I suggest we do it in a police station and point out that his local PD even welcomes people to use their lobby for CL, etc. on their website. More umms and ahhs. "I need to contact eBay support to see if they allow this." I point him to eBay's specific FAQ page describing exactly this and how they recommend doing in person sales, and refunds, documentation thereof, and how they support it. But he ignores that and says, "I never heard back from eBay support, so I'm not sure what to do". I point this page out again, and he goes silent.
I opened a dispute. No evidence was provided for damage or faulty goods, referenced the multiple requests for video, or of anything.) Multiple instances of the buyer trying to show something was problematic with the listing, not abiding by the agreement and refusing/avoiding any method of returning damaged items.
Overnight, no further inquiries.
"We have closed your dispute. Based on our review, the buyer is entitled to keep the partial refund for damage. He is also not required to return the damaged items".
So he ended up with a Mavic 2 Pro, with less than 20 hours flight time, 5 batteries, for in the order of $950, all told.
Should have filed a police report. eBay will side with you and refund you. Had similar happen a few times and every time just required filling out a form in whatever city the item was sent to and attaching it to the dispute.
Yeah, $700 is worth a lawsuit. eBay knows who the buyer is and would be required to turn over the transcripts of the conversations to the court, and if you're suing the buyer eBay's arbitration system wouldn't protect them.
Then, after you win that, you can drag eBay into arbitration for the suffering. I bet you'd walk away with $5k or so after expenses if you have a decent lawyer.
The fee for filing a lawsuit by itself is $405. That's before any lawyer touches anything and you get to find out how high a lawyer's hourly rate is.
A simple, easy lawsuit will cost you in the same range as a house. Even if you win, thanks to the American rule of "each side pays their own attorneys' fees."
anecdotally; this is why I now use fb marketplace exclusively to sell stuff. cash only. meet in person; feel free to test / inspect stuff. All sales are final and are as-is.
Had similar issues. eBay being a mediator for your money but not the actual items is maybe inherently a dysfunctional system. They don't make any representations as to the accuracy of a listing, but will happily pass judgment on whether to refund or not based on... the aacuracy of a listing.
Maybe not every sale needs a middleman, but in a lot of cases, seems like there would be a benefit to it.
I think the difference is that GameStop already has this network of pawn shops, and those stores are doing enough business to justify their existence (at least somewhat; GameStop wasn't doing great before all the craziness). I could see something like the UPS kiosk in my local Walmart working; if you offered eBay returns at GameStop stores, you would be adding revenue without needing to justify an entire store to it like eBay would have needed to.
There's also the synergy that GameStop now has access to more used gaming inventory, a category that I'm led to believe is high margin for the stores.
> GameStop already has this network of pawn shops, and those stores are doing enough business to justify their existence
Gamestop closed 2,400 stores from 2020 to present, and operates just 2,200 stores currently. They'll continue to close stores as their revenue continues to shrink (down 60% in the last decade).
>used gaming inventory
physical used game inventory is a fraction of what it was a decade ago, and continues to shrink as a category, digital sales continue to climb and exclude Gamestop
It's reasonable to predict that as physical media is phased out by the likes of Sony, Microsoft, and Nintendo, that the value of offline capable inventory will shift to an investment instead of a liability. Increasing their percent cut as a result.
Their margin was highest on used physical media, which continues to plummet. Physical sales are down from $13b in 2015 to $1.5b in 2025, while total sales of physical + digital went from $23.5b in 2015 to $60b in 2025. Physical media is a tiny fraction of current game sales, even if their margin skyrockets, they're stuck in a tiny kid pool of potential sales.
Not to be harsh on people who like this stuff, but reminds me of whenever people bring up how big vinyl record sales are now. Which is like, yea they're "big" just because it was a tiny market for the last decade and they're profiting mostly on nostalgia. Vinyl's not making some huge comeback, but it will probably sustain some niche resellers for a long time.
Yes, exactly. In fact there were some ebay "helper" companies that made a go of it in the early 2000's. They went out of business because it doesn't add enough value. USPS created Media Mail and flat rate boxes, and UPS stores are found in nearly every community. They handle the hard part (shipping) well enough.
The only thing I can think of is Gamestop positioning to become a clearing house for fan swag or gaming items the way Woot is for Amazon overstock.
There's one of these near me in a shopping center with terminally low rents. I think the additional value add for these places is that a) they can help you price the item to move and b) they can wade through eBay support if things go wrong.
I remember one of these shops all the way back in the late 2000s. At the time I was confused about whether it was operated by eBay or a third party. It did not last long.
Yes, exactly. In fact there were some ebay "helper" companies that made a go of it in the early 2000's. They went out of business because it doesn't add enough value
It didn't add enough value back then, but IMHO it does now. Selling on eBay is a massive hassle these days for a variety of reasons, and much less profitable for onesy-twosy transactions than it used to be.
If I could just drop off a bunch of stuff at my local GameStop and forget about it until the checks arrive in the mail... yeah, there's definitely a business model there.
Yes, consignment stores have existed for a long time, but they aren't generally functional interfaces to eBay. If you want your stuff to sit on a shelf for the next few years, a consignment store is OK, I suppose.
When I sell something, I usually want the item gone ASAP in exchange for a modest amount of money.
There’s a ton of eBay sellers doing consignment, usually for friends that just want to sell things but I’ve seen some much larger operations selling pallets worth of goods from stores not large enough to wholesale or liquidate.
Yep, watching the store/usernames of sellers can be instructive (many thrift stores, pawn shops, consignment stores, and others list things on eBay, especially for fixed price).
One of the reasons to refund an order is “already sold in-person”.
USPS is the only storefront I can think of that allows you to walk in, grab an unlimited amount of boxes/supplies, and walk out with no questions asked.
They will even deliver boxes to your front door, for free, by simply submitting a form online.
It's so easy, I'm not at all surprised that it's occasionally abused.
Then have to waste time to politely educate the sellers…
They wrap up the free priority mail flat rate boxes to obscure markings to send them with a cheaper service. So they know should they’re naughty but might not realize it’s reached the level of a crime, perhaps. Definitely didn’t realize they’d have customers who don’t like stealing from themselves (taxpayers)
It’s a federal crime the the post office periodically investigates. You get offered to pay USPS’s estimate of the amount of postage you stole, or else face a criminal trial.
FedEx and UPS will report priority
Mail boxes to USPS as well.
Ah, so Catherine Keener's "We Sell Your Stuff On eBay" store from The 40-Year-Old Virgin is back, and now it's worth $55B. Always knew she was a visionary.
> and then they list it on eBay and turn a bit of a profit with a local pickup option available
Sort of wondering why nobody did this already. I know that the better charity shops do this with rare and unusual books/records. The UK equivalent CeX has an online offering through webuy.com, which appears to be a Chinese owned multinational.
This is called consignment and is an industry unto itself, usually for antiques since you need a lot of space. You give them your goods and they sell them. You get a cut if they actually sell.
Obviously they're going to need to liquidate a lot of this stuff. It can be quite lucrative if done right. You're basically getting inventory for free.
Consignment doesn't offer the seller a very good monetary deal, though. They're essentially a junk hauler that might pay you a few bucks. We all have that pile of old computer components that we could probably sell piece by piece for $400 on eBay, $200 on Craigslist/FB Marketplace, $100 at a yard sale, and maybe if you're lucky a consignment place will give you a $40 for it all.
The only missing bit is the meme-stock side of business where emoji-slinging, HODL'ng bag-holder, retail investors with no actual investment strategy fund the whole operation. The amount of misinformation pumping $GME on social media is staggering.
I mean $40 if you are lucky or goodwill. You could get more selling it “proper” but the transaction cost of it is super not worth it (for me). When I want something out of my house, I want it out of my fucking house. Listing it on Craigslist means I have to babysit it, handle questions, but worse… the fucking thing is still in my house!. And I was over that, whatever the fuck it was, like… a week ago. Now it’s just sitting there in my life cluttering it up. Better take to the garbage or goodwill. Then it’s gone!
At least with a consignment shop I will hopefully get something out of the deal.
> Obviously they're going to need to liquidate a lot of this stuff.
If you read online employees have talked about how they donated it or threw it all out, presumably there is very little of that stuff left at this point (and probably nothing left of any real value).
EBay also has some very accurate data about market pricing for second hand goods and what categories are at greater risk of being returned, which reduces the risk of holding riskier items.
EDIT: regarding the CEO, you should find the interview where he’s challenged about funding.
Was this not lampooned directly in "40 Year Old Virgin" where a young Jonah Hill tries to buy some disco boots at an ebay store but can't because you have to go through the website.
> Imagine being able to list your eBay items locally without having to have people needing to come to your house, or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
I kind of assumed there were already local businesses that already did this? Seems like a decent side-line for any drop-shippers out there. In any event, moving that activity into a local strip-mall would be super convenient for everyone.
They would lose sellers in a heartbeat, myself included. The eBay fees are bad enough as it is, throw in whatever insane amount GameStop would take and it would squeeze everyone out.
eBay isn’t the same individuals selling one off things like it used to be. Sellers are established businesses.
But eBay is just bad company with a bad reputation. Why would they buy it instead something like Etsy or make their own thing? If you would ask me what are the worst companies from the “old guard” I would name eBay and PayPal as prime suspects.
Because Etsy is not a general second-hand marketplace. Its niche is artisans making small batch items. And making your own thing at the scale of ebay is not exactly a small feat.
thinking back to 2021 it really shows we need some reform around brokers being able to land their customers stock to short sellers without any kind of consent. Also same shares should not be shortable multiple times ...
What? Most (all?) platforms let you opt out of this, and you receive payment when your shares are borrowed. And shares are fungible, how would it matter if one share is borrowed by 10 people or by none?
“What? Most (all?) platforms let you opt out of this.”
Genuinely didn’t know that appreciate you pointing it out.
“Shares are fungible, how would it matter if one share is borrowed by 10 people or by none?”
Lets hedge funds create disproportionate downward pressure
> The original shorting of GameStop back in 2021 gave them a bit of a boost back into the green.
IIRC, the short (borrowing stock, selling high, waiting for a downtrend, then buying low to pay back the borrowed stock buy an agreed date) was accelerating the fall of GameStop's stock price.
Then some Reddit knuckleheads noticed the hedge fund shorting GameStop was over-leveraged. They also found the deadline the hedge fund had to repay those shares to the bank.
The knuckleheads pumped the stock. Technical term: I like the stonk.
The knuckleheads then bought and held GameStop stonks. Institutional investors joined in. The hedge fund was legally obligated to pay any price to buy back the shares necessary to pay back the loan by the deadline. So the longer everyone else held on to the stonk, the more the hedge fund would be forced to pay. Squeezing the hedge fund in this way caused the stonks' price to temporarily skyrocket. Technical terms: hodl and rocket emoji
The original Reddit knuckleheads eventually stopped hodl'ing and sold high.
IIRC the hedge fund eventually went under.
Unfortunately, like all things, the knuckliest of Reddit heads would keep hodl'ing all the way back to the ground[1], hoping to cargo cult another squeeze by building wooden towers and dirt tarmacs to entice the sky rockets back. I'm not a stonk hodl'er, but I'd guess they are predominantly the ones who provided capital for Gamestop to buy Ebay. It's probably the most expensive and baroque way to fund a new consignment shop in your home town.
1: is there an emoji for a rocket crashing toward the ground? If not, there should be.
Eh. The capital was provided by various share offerings and, most recently, a bond sale, which retail probably and definitely did not buy, respectively.
But here's the fun part. All of those issuances were made during periods of weirdly high prices. The biggest one was this time 2 years ago. The price jumped to $80. Doesn't seem like much, but there was a share split in 2022, 4:1. Between that and the offerings, buying the same proportion of Gamestop The Company as one share did in late January
2021 would have cost about... $350? The intraday high from 2021? Weird. Oh, but it happened in after-hours. When non-institutional traders usually aren't active...
I don't think anyone truly knows exactly what's going on with Gamestop's stock price.
There is too much overlap with the tropes found in communities who want to believe in aliens and interdimensional beings to take the Gamestop saga seriously. So many appeals to emotion and ignorance, and the investment in a particular outcome has made the reddit groups around this topic indistinguishable from people who are ride or die Trumpers impervious to the falsification of their bad ideas. There is no longer a rubric of reasonable evaluation of new relevant information. The festering wound of people like Ken Griffin effortlessly getting away with their crimes has gone on for so long that has radicalized people to interpret every new piece of info through the lens of being the first crumplings of an eventual avalanche of retribution that has been promised to them.
Just bought a used switch there yesterday, 2 guys are selling or trading some kind of game card, kid and his dad getting a PS4... Like you say, no one goes to game stop anymore, it's too crowded ;)
The part you’re almost touching on but not directly mentioning is the trading card and collectible marketplace.
GameStop would probably be gone by now despite the meme stock if it wasn’t for trading card games and other similar collectibles, and eBay is very involved in that market.
eBay is dying, new competitors are being created constantly, and the big ones like Poshmark are getting more North American buyers and sellers. eBay has barely grown since their post covid slump
Maybe eBay survives as an international site but even at that point, with $20B in debt this will just follow the regular PE playbook of shutting down after many layoffs and pivots
The entire concept of, "I have $1,000 in the bank, im going to buy a $10,000 company, but the debt will be on the companies name, not mine" needs to pass. Can you imagine if the mortgage was owned by our home, not ourselves. And we could stop paying it without any personal consequences
If you want to buy a $50B company, you should pay $50B (loans are fine, but not putting the new company in debt)
I don't really know what alternative there is to eBay as an 'everything shop'. I can get specific screws there, or diff fluid, or a customised motorhome name sticker, or an old baseball cap for an airshow I attended in 2008.
And if I bought the wrong diff fluid I can sell it.
The main value over Amazon, though, is that the search works.
> The main value over Amazon, though, is that the search works.
Super true. You can actually search for the exact brand you want and not get a search result page full of brands XIAOLE, LLKAPOO, JEMROK, QPPNSS, VRINHH.
Also, I don't really know why, but I have much greater confidence on eBay that I'm not going to get something counterfeit or unsafe.
Facebook marketplace is an everything shop, though a bit more local in nature. Also, it's much easier for small businesses that ship to have an online store thanks to Shopify, etc.
The last few times I've used EBay is to get parts for old garden tractors, and even for that I've found cheaper options with small retailers that specialize in that stuff. Most ebay shipping pushes the cost up too much, and with the small retailers usually I can get a bunch of things I need at the same shipping price.
FB Marketplace is full of scammers too. Every time we've tried to sell something, we've had people try to steal our phone number and register it with their Google Voice account.
Interesting you think that because my main experience is the search is horribly broken and they do nothing globally to fix it. Most of it saved searches are full of exclusions because a positive search includes so many irrelevant items. And they don’t enforce categorization so listers constantly put in better categories for their items, when they aren’t just lying with things like “calculator not HP”.
At this point, online fraud control is getting absurd, and AI is just making it untenable. I simply won't use ebay for anything above $50 anymore.
Having physical locations that you have to come to pick up your Thneed protects both buyer and seller. Buyer can verify that what was described is delivered and seller can verify actual pickup with ID.
If they apply a bit of logistics for shipping between stores, Gamestop could crush it.
Fraud is forcing the pendulum to swing from everything-online back to everything-in-person.
> Can you imagine if the mortgage was owned by our home, not ourselves. And we could stop paying it without any personal consequences
To a large degree you can just stop paying your mortgage.
The biggest personal consequence is you will be evicted and lose both your place to live and any equity you built up.
The other main consequence is it will show up on your credit report for 7 years. Maybe some specific forms ask "have you ever been foreclosed on" in the future.
This depends entirely on your local laws and the kinds of loans banks offer.
In most places, you can only get recourse mortgages. You will be liable for the rest of the mortgage, if the value of the house drops so much that selling it doesn't cover the remaining debt.
House values dropping a lot is something that happens fairly rarely, but it tends to happen exactly during the times when you are most likely to be unable to pay your mortgage (recessions, industry downturns, etc.)
As a side effect of bailing out banks they have a lower risk profile than entities that don’t get bailouts. It’s essentially an additional subsidy on top of the already generous ‘money creation’ they’re allowed to do. It’s impossible to compete against this. The riskier the bets the stronger the subsidy so of course they’ll crank risk up to 11. Since the fate of banks and pensions are tied you can’t punish the banks without also punishing pensioners and pensioners are a strong voting block. It’s a distorted economic system that can only either crash or become more distorted. Since becoming more distorted enriches the already wealthy then that’s the only option that will be taken. The only thing that can stop it is to run out of resources to spend trying to save it. Importing a large number of foreigners is a rather creative (desperate) solution. I don’t know how long this will last but I’m confident I will see a major economic calamity in my lifetime.
I mean I don't love eBay, but it's certainly not dying, where did you get that idea? Its revenue has continued to grow every year post-COVID, and competitors all face the central challenge of eBay's network effect.
It's not experience massive growth but that's because it's a pretty mature market by this point. People who want to sell their stuff already use eBay. It works. It's mature.
> or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
More than 10 years ago eBay tried to launch a program where they would buy your stuff and then list it themselves, but it didn't work out.
GME moon and all that in 2021 was financial engineering and mass media coordinated BS btw. they were all reporting it in same week with never seen details, with creating BS narratives. but you all consume and believe the details of it? good work by the engineers, nothing more.
Same for FAANG BS, ZIRP BS writing made by millions of bots online. Even before llms
I think this is the opinion of someone who thinks about personal security (like many on this site) and would prefer not to use Facebook marketplace. From observing many of those around me, this is an uncommon concern. Facebook marketplace is insanely dominant, and nobody cares about inviting people to their house. They would rather invite someone to their house than have to drive to GameStop and drop off their stuff in exchange for losing money on gas, losing time, and losing a cut of the sale price.
I've never used it myself but I've helped out a family members with Marketplace sales before - go and be their nominal "back-up" when they meet the buyer in a local car-park.
I watched that interview live this AM and was so confused. The CEO looked annoyed and pissed the entire interview. Kept answering questions with “it’s on our website [awkward silence]”
It almost seemed like he was incredibly hung over and didn’t sleep last night.
But I got the feeling he was being a jerk on purpose. Still don’t understand why though.
CEO gets paid "only if GameStop achieves a market capitalization of $20 billion." Buying a $55bn company would certainly achieve that quickly. I'm not sure how they'd manage that (buy with what? Memes?), other than the should-be-illegal process of putting debt on the acquired company's balance sheet.
I read that book, and my recommendation is to skip the third act, which is painfully repetitive.
In fact, coming from a finance background, I didn't find the book in general to be particularly insightful, and much more ragebait / policy oriented (which makes sense given the author was a DOJ Antitrust prosecutor)
This book got a unfortunate title. Private Equity can be a completely legitimate activity.
What it needs is some regulation on some underhanded financial tatics it uses, such as LBO.
The vast majority of the time, you don't hear about it at all. Leveraged buyouts and the monopolistic strategies like buying out all the private doctors or veterinarians in a region get all the negative press but they're a tiny fraction of private equity.
The big money is in really boring industries like mining/oil/resource extraction, power plants, infrastructure, construction, and other industries that are predictable and in high demand everywhere. PE firms often get the best deals because they thrive on those kinds of connections and can offer up large amounts of capital on favorable terms in exchange for first dibs. The "rich get richer" is their primary strategy and it works without minmaxing exploitation because that's a bottom feeder strategy, not one that can guarantee steady returns on tens of billions of dollars.
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.
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.
It's absolutely an LBO. The leverage is maximizing debt to equity. That debt is then transferred to the new entity.
It's how they destroy companies while making billions in private profit. They over leverage them. Accrue debts. Sell of equity. Wash, rinse, repeat until bankrupt.
It may not be bad for the buyers, lenders, or the previous owners who all profit. But even then it could still be bad for regular people/society at large if it incentivizes anti-consumer practices by financial necessity when an otherwise healthy business suddenly has billions of dollars of debt it has to pay off ASAP. In which case it sort of looks like a simple transfer of wealth from existing customers to the organizers of the leveraged buyout with no broader societal value provided like new jobs created, R&D, etc.
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.
Say you take out a mortgage, then rent the house to a series of meth dealers to extract the rent while devaluing the property, and then default: you're still personally on the hook for any post-foreclosure deficiency judgment. One issue with LBOs is that, after extracting cash and fees, PE funds have various ways to extinguish liabilities that individuals don't, 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.
There are various proposals to deal with this, but the most effective are probably imposing joint and several liability on certain kinds of litigation (breaking the "investor veil" and allowing rights of action against PE funds for the actions of their portcos) and limiting business judgment rule protection for directors and senior managers who approve LBO sales that are reasonably foreseeable to end in bankruptcy, which creates personal liability for fiduciaries. In other words, align the financial and personal interests of the individuals and companies involved with those of the acquired entity.
>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 declaring bankruptcy. I think banks can be considered sophisticated enough that if they got hosed on a LBO deal, that it's hard to feel sympathy for them.
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.
I mean, if I'm allowed to just make up silly hypotheticals, I can easily justify anything.
Say I raise money for a friend to buy a house and they proceed to rent it out to meth dealers. The friend is the one on the hook for the loans, of course; but would I not be on the hook for at least a reputation hit such that I can't do that again? Or do we think folks can get away with that sort of poor judgement forever?
In that sort of hypothetical the Mortgage bank is likely to take one look at your friend, see you with all the money for the down payment, and decide that you need to at least cosign the loan (if not be solely responsible). You would be on the hook for the reputation (and credit score) hit and certainly still paying off the rest of the loan or face foreclosure and possibly a criminal lawsuit for fraud.
Which yeah, leaves a lot of questions for why this is legal for an LBO. Where's the "credit score" hit on these PE firms doing LBOs? How is it that these investors are allowed to be their own mortgage bank, not require themselves to cosign the very loan they are providing the down payment equity for, and not be liable for damages such as bankruptcy of the entity they put on the hook for the loan?
If you give the friend the money as a gift, you have nothing to do with it, right? if you give it to him as a loan to inflate his assets and don't disclose that then you are committing a Federal crime.
I didn't give any money in that hypothetical. Rather, I convinced a lot of other people to give them the loan. That is, largely, exactly what fundraising is. You convince other people to give money to someone or something.
If people are regularly doing this at my request, and it is constantly going to someone that just burns the money, how are people still taking my requests?
Yes. That doesn't change my question, here. You can arrange to bootstrap another company. It could go bust in a way that you are not on the hook for any money, but you should be on the hook for the things you did. That is the entirety of my point.
The hypotheticals being pushed on this thread have a foregone conclusion that the arranging party is completely free of any hit.
The hypotheticals seem to be in line with reality though. This business model works because the people who make money are the ones who are in control of whether to do it. Liquidating a large company in bankruptcy can get a lot of the money back for the investors while leaving a smoking ruin where it used to be generating economic value.
Are they, though? There are certainly some cases where it has happened, but I don't think it has been established that that is the norm.
Naive searching on the term shows that they common in PE, and they do have a worse default rate at 20% over 2% otherwise. Certainly something to look at more closely. And I would be nervous being party to one. That said, 80% success is still better than what some companies are looking at otherwise.
It is a thorny question. The best way I can square the difference is that generally buying a house with debt is on the debtor and the house itself is collateral. The debtor can't pay back the loan the house is taken by the bank to be sold. Where as a PE leveraged by out the debtor is the target company. A company is different than real estate in that they are a legal entity that is now responsible to pay back a loan equal to their own value. The collateral is the business, but the business is now illiquid and has to sell of real assets and go bankrupt.
For example, Joanne's Fabrics was a profitable business with a fair amount of real estate. After PE bought them and was saddled with unreasonable debt they were in the red and had to sell all their stores. This removed useful and profitable business from the economy and sold off the assets in a fire sale. Where as me losing a house just means a bank now owns it and someone else can buy it. But if someone were to buy Joanne's they'd have to pay off the debt Joanne's owed for being bought and run into the ground
There is a long practice of having cosigners on home loans. This feels basically like that.
Which, granted, if you don't like the idea of establishing a company to take on loan responsibilities, I am not trying to offer a defense of that. Was a legit question of how you would structure it so that this is illegal, but home/auto loans are not.
A cosigner is different than what's happening in leveraged buy outs. A Cosigner is financially responsible if the debtor cannot pay back their portion of the loan. In a Leveraged buyout the purchaser does not take on financial liability for the debt, that is all placed on the company being purchased. This means that if the purchaser isn't even the cosigner in this scenario; the company being purchased is the sole entity responsible for repayment. So if GameStop goes through with this, but Ebay can't repay the debt than Ebay would suffer graver consequences than GameStop
But the biggest reason the purchaser does not have to cosign that loan is because in an LBO the purchaser is also essentially the mortgage bank for that loan. Should that be allowed?
Fair, but the nefarious scenarios people are talking about should at least be a major reputational hit for the people that did the fund raising. We are literally describing a ton of value getting destroyed. Someone is taking that hit.
It would be functionally the same as what you described if the parent company took on the debt, but that’s not how they do it. They make the purchased entity take on the debt. Hence why you often see mass layoffs in the company that was acquired soon after the deed was done. The company has so much debt it can barely function and the easiest way to pay some back is redirecting salaries at it.
Then once you realize why private equity firms do this, how their leaders have extreme monetary incentives to squeeze value out of companies in ways not limited to this, you realize why it’s insane how we have basically zero regulation on it.
Home owns are owned by people, not the home itself. If someone fails to pay a loan, their own credit score will be impacted
For these PE loans, its the new company that takes on the debt, not the buyer. Essentially any broke person can "afford" any trillion dollar company this way
Home loans are secured by the asset (the home). It's comparable to stock, but it's a less liquid asset.
Any broke person can afford a trillion dollar loan, if they can convince the bank that their house is worth 1.8 trillion dollars. But is that really possible?
Loan companies do due diligence so if GameStop is $A and eBay is worth $A + $B, then so long as $A/$B remains the same, the acquiring company owns two assets worth the full price of the loan.
It doesn't seem to be a scam to me. Am I missing something?
The difference is that when you buy a home the debt is in your name and you are required to pay it off. In a leveraged buy out wouldn't be to person taking out the loan, the debt is owned by the target of the purchase. If it were like a home loan and this deal goes south GameStop would go bankrupt and have to sell it's own assets to cover the losses. But in reality the debt from the deal would be owned by Ebay and if GameStop can't pay the loan back it'd force Ebay into bankruptcy and sell Ebay's assets. It's essentially a riskless move by GameStop and PE in general. Heads GameStop wins tails Ebay loses
There are other categories of real estate loans where the debt is against the property itself. The lender evaluates the property's income and expenses when underwriting the loan.
Fair point, it's a corporation taking out the loan so there's nobody to go after if the company goes under the way there is if the value of your house tanks and you stop paying your mortgage. But doesn't the bank take that risk into account when deciding whether to issue the loan? Why should that be illegal?
The way I’m reading your question, it seems like you are looking for the law to follow philosophically consistent principles.
That is simply not the case and lawmakers can make any kind of law to shape the society how we wish. If leveraged buyouts are creating problems for the country, then it’s totally valid to make them illegal in certain cases.
The problem is that people can take loans without financial liability (not how home purchases work) and drive profitable businesses (which are good for the economy) into the ground (bad for the economy and society).
No one is worried about the bank making the loan in this situation. They are concerned that PE is buying up large parts of the economy using debt they aren't responsible for, which makes them irresponsible owners because they do not face consequences when the moves fail
> which makes them irresponsible owners because they do not face consequences when the moves fail
Again, isn't that entirely the bank's problem? They're responsible for the debt if the company can't pay it, right? I agree on the surface this seems like a bad deal for the bank, but what makes you think you know better than the bank so much so that they shouldn't even be allowed to take that risk?
Leaving aside that the new company is the buyer; the point remains that home and car loans are leveraged loans. With the main asset in the leverage being that which is being bought. Defaulting on that loan results in the assets going to the lender.
If a lender builds a pattern of lending to people that can't make the payments, that lender will take a hit. If we think that isn't happening, why? And how could we return us to that?
Or, back to my question, how would you structure a legal framework where some loans can be done this way, but others could not? (I can think of a few ways, largely curious if I have a blind spot here.)
In a home loan, the borrower buys a house and pledges that house as collateral. The debt is the buyer’s obligation. The house does not have to “pay the mortgage” by laying off the kitchen, selling the roof, or cutting maintenance. The borrower uses outside income to service the debt.
In an LBO, a private equity buyer often buys a company using a large amount of debt, but the debt is typically placed on the acquired company’s balance sheet or serviced from that company’s cash flows. In effect, the target company helps pay for its own acquisition. That is the key difference.
In a lot of LBO schemas, the acquirer loads the target with, abusing leverage to maximize its returns, but this leaves the company with very little margin errors, any hiccup in the economy, and Kabum! The company goes under, an once viable company closes its doors, employees lose their jobs and local economies suffer. Meanwhile, the PE entity walks with as much cash as it could extract from the acquired company and debt-free.
Some PEs also go one step ahead, make the acquired company borrow more money, not to invest in the business, or restructure debt, but to pay a dividend to them.
In other cases, PE companies acquire a controlling block and then use it to make the company sell their assets to them, to be immediatelly leased back to the company. Then, there is also the practice of extracting all kins of "monitoring fees", "advisory fees", "consulting fees", etc. for services that are vague and frequently of questionable value.
PE companies also frequently engage in overly agressive cost-cutting to manipulate the EBITDA in the short run to sell the company at a appreaciated valuation, but hurting the long term value creation potential of the company and the quality of their services.
For PE, sometimes even bankruptcy is a business strategy.
Technically the lender is the purchaser in the LBO which is also why this is so much the purchased company having to pay for its own purchase. Which seems to me like the easiest part to regulate: require third party lenders who can also audit the details of the loan terms and fees.
Taking a $20b loan from TD Bank + sitting on $9b CASH + GameStop stock for the rest. They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment. Smart if they can make it work.
Update: Numbers still don’t add to $55b - I think there’s a $14b shortfall. Not sure about how they are planning to fund that.
> They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment.
Is that really an advantage? Fulfilment is always handled by a lot of places for the big e-retailers for returns, which is similar to what eBay needs for sellers.
How much does Staples charge for its Amazon return fulfillment where you don't even need to wrap up the item?
I question whether it is advantageous to use GameStop stores for this or just to piggy back on what Staples is already offering to Amazon and others for their returns? Fulfilling returns for Amazon isn't significantly different to shipping eBay orders.
My kneejerk is that most consumers these days expect delivery for items purchased online, and allowing them to pick up their items at a brick and mortar probably isn't the issue.
Now, dropping off items you're selling? That probably removes a decent hurdle for many first-time/one-time users who aren't familiar with shipping (what box/label/insurance/padding/...).
> My kneejerk is that most consumers these days expect delivery for items purchased online
100%.
> Now, dropping off items you're selling?
This is what Staples is offering to Amazon but for returns - quite similar. And they could offer them to eBay as well I am sure. You do not need your own chain of brick and mortar stores to do this and I am sure the cost per drop off would be cheaper with Staples than your own chain that only serves you.
GameStop is a game of constant pivots that sound good to its meme-believers that do not really work in the real-world.
> This is what Staples is offering to Amazon but for returns
Yes, and usps stores and Whole Foods do that for Amazon in the US as well. The difference is that each of those items don’t need to be individually packaged and shipped to unique locations. My local USPS put all the returns for the day in a giant bin and an Amazon driver picks them up.
I think the cost of labor and liability involved in having a local retail worker wrap, label, and ship every package would be an order of magnitude higher than shipping alone and destroy any value in offering it.
Sorry, are you saying that USPS cannot handle shipping across the country cost effectively? But somehow GameStop can, which has never done point-to-point shipping before?
A place that you could take items and have them packed and shipped for you would remove an enormous hurdle for new eBay sellers. It's easily the most annoying part of the entire process.
Hell, maybe they could even list items for people? Like a massive digital pawn shop.
I could see this really working out for them if they do it right.
Can confirm. The main reason why I don't sell stuff on eBay more is because of the high shipping costs and frequent scams.
Facebook Markerplace has issues of its own, but if you agree to meet up at a safe public location to buy/sell the item in person, then it mostly alleviates those two issues aside from the small chance of receiving counterfeit bills.
If Gamestop and eBay merge, then they could (potentially) offer a better deal to buyers/sellers by either buying certain items directly, shipping them at lower costs, or having an employee "verify" the item before it ships so that the seller receives better protections.
That's assuming that this is truly an ambitious merger rather than just being some kind of exit liquidity scam that gives Ryan Cohen a golden parachute right before he peaces out.
>Is that really an advantage? Fulfilment is always handled by a lot of places for the big e-retailers for returns, which is similar to what eBay needs for sellers.
I think the advantage is going to be "bring your junk to GameStop and an employee will put it up for sale and handle shipping"
You'd get considerably more trust buying something on ebay that at least some teenager looked at and verified was real and powered on, etc.
A company doesn't need $55bn to buy a $55bn company. They can issue new GME shares and exchange $EBAY for $GME. These are sometimes called "stock-for-stock" transactions
GameStop has a standing approved agreement to issue up to a billion new shares. If you read the offer you will see it is 50% financed by GameStop stock.
They threw him a hardball today in his cnbc interview on this topic. $GME stock value would plummet short term, but the combined company would revalue much higher.
Current Gamestop shareholders would be diluted. They would own, proportionally, a much small slice of the combined company, but at a higher price point.
The framing of this as, "Ryan Cohen is diluting Gamestop shareholders in order to meet the terms of his enormous pay package" is disingenuous though, as his pay package is all stock. He's diluting himself too. He obviously has faith that, long term, the value of the combined company can substantially grow.
He has a massive stake in Gamestop outside of this pay package. The loss from diluting his massive accumulated position is not worth the bonus unless he thinks the price will recover long term.
My take? The strategy is like a contractor fixing up houses. GameStop was the crappiest house on the block. He’s fixed it up and is using it as collateral to take out a loan and buy the dilapidated mansion next door (eBay). He’ll keep going until he’s gentrified the whole neighborhood using the value of the current business as collateral to buy the next. He wants to sell only when the value of the entire gentrified neighborhood reflects market rate for the work he's put in.
The only thing that Cohen has done is shut down stores and cut costs massively at the expensive of revenue. He hasn't really fixed anything, he is just managing their demise. All of his strategic initiatives like expansion of e-commerce or an NFT platform were complete disasters that had to be wound down. The only reason the company is even showing a profit is because they repeatedly diluted shareholders to raise cash and then re-invested that money into Treasuries. Basically, if you are buying GME stock, you are getting an expensive fixed income wrapper.
Buying EBAY would be a bad deal for pretty much everyone involved. GME shareholders get diluted to buy EBAY for way too much money. EBAY shareholders get paid in vastly overvalued GME shares. And the entire thing would be managed by some guy whose only strategic idea is to cut costs. The only one who would benefit is Cohen, because it would create a sufficiently liquid market for him to sell his stake, something that is not currently possible in GME.
> The only reason the company is even showing a profit is because they repeatedly diluted shareholders to raise cash and then re-invested that money into Treasuries.
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.
So you mean...marrying someone but transfer all the personal debt to the others, then divorcing so that I have no responsibility whatsoever? Not even an obligation to settle for the debt just like disappeared through an expired relationship?
To me it seems more like leveraged buyouts + debt restructuring all at once. I rather coin this term "debt offloading", which could also cover the cases with Enron for the tactics they used about 25 years ago
As soon as you mention Texas Two-step, you'll get a chorus of people who argue that it's a good thing, that it's really the defendants doing the plaintiffs a favor and making it easier and cheaper to sue them and the fact that each company that has done this has snuck out of between 90 and 99% of its obligations and washed their hands of them is a complete coincidence and that just wait, you'll see, the next time a company does it (using the same law firm that has handled all these) they'll really, truly, cover all of their obligations, perhaps even more, and at less cost and effort to their beleaguered plaintiffs.
In personal terms there is the "deathbed divorce", a uniquely American construct where couples, often elderly, get divorced while one is in hospital or hospice in an attempt to not saddle their soon to be widowed partner with six digits of medical debt.
In another uniquely American construct, that won't stop hospitals calling up all their relatives either implying that they are now responsible for those debts, or that it would be a mark of respect and honor if, even not, the relative would be willing to settle them anyway.
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.
He can argue that. But to me it seems more likely that culture and market demands are so different between the two companies that sharing any substantial resources would be to the detriment of at least one of the two halves. And more likely detrimental to both
The most beneficial thing is how even proposing this shifts peoples' perception of Gamestop from a beloved but struggling brick and mortar chain to a successful business
the only benefit I can see is some kind of eBay pick up and verification scheme where sellers use the gamestop locations to send their products and buyers go theere to pick it up. That would basically create a "this is garbage feedback" that could cleanup some of ebay's long standing problems in trust.
While this seems like the perfect synergy with a company that has too many branches and not enough business, those branches are also tiny. I'd bet employees are not enthusiastic about becoming UPS.
Becoming Radio Shack / Microcenter, as far as 3D Printing and DIY electronics, seems like it intersects with their target audience more, but they're also probably pretty short on space for that.
Employee enthusiasm isn’t really much of a factor. For better or worse, in the event of significant change of the brick & mortar day to day operations then employee continuity & institutional knowledge is even less of an actual strategic asset than the minimal treatment it already gets in consideration.
- SPAC IPOs that dodge standard disclosure requirements and worsen information asymmetry. See WeWork.
- Board positions filled with CEO loyalists instead of independent directors. See OpenAI firing Altman before Microsoft reinstated him.
- Management taking seemingly arbitrary decisions that turn out to be directly linked to their own compensation. SpaceX ordering a bunch of Teslas, or merging with a distressed asset (xAI). See above point on loyalist boards.
- The very concept of leveraged buyouts where financiers borrow money to buy a company, then put the burden on repayment on the company AND pay themselves hefty management fees. This inevitably leads to layoffs and a rapid decline in product/service quality while the company is scrapped for parts.
Slumlord owners of the network effect monopolies innovating ever lower investment in innovation and upkeep with ever higher increases in rent extraction, with a few nipple tassles slapped on the side to entice retail investor hype cycles.
>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.
GameStop had revenues of $3bn last year and eBay was $10-12bn, so combined it's $13-15bn. A net income increase of 1.2bn on that gross is a tall order for M&A efficiencies. Especially difficult when the two companies have essentially zero operational crossover, besides business admin. It doesn't seem likely to me that merging eBay's accounting/legal departments into GME's (and similar efficiency gains) is going to save anything close to a billion across the two entities.
I don't think this is a serious assessment. For years, the core business of both companies has been facilitating the flow of used goods. Gamestop has moved strongly into collectibles recently, with a partnership with collectible grading firm PSA and the introduction of (essentially) lucrative trading card lootboxes, whereas eBay has capitalized on the same expansion of the collectibles market with new live/flash auction features.
IIRC, Gamestop recently had a "trade-in anything" day, where they accepted a variety of products for store credit. Seems an awful lot like this was some sort of test for accepting products in-store for eBay listings, or something along those lines. They already accept trading cards to send off to PSA for grading and to place into their lootbox system.
As far as efficiencies go, you can see things like shifting shipping by individual sellers to mass shipping to/from a warehouse, a much heavier footprint in collectibles, and perhaps quality control that reduces buyer disputes (this one's a bit iffy).
Well let's be clear, the "trade-in anything" day was a fancy discount day. They gave everybody $5 for whatever they brought in, online you can read from employees that they just donated or threw it all away, no attempt to actually keep any of it to sell.
That said IMO the biggest difference in the two situations you're describing is that EBay is not in the business of buying the items to then sell later, they just facilitate transactions between two parties and some of the logistics (depending on the seller). They're similar as far as dealing with "used goods" but the actual design of the business and risk being taken on is very different.
EBay also not really lacking what you're describing - there are fufillment centers that can be used for EBay listings, there's the EBay "Authenticity Guarantee" program for cards, they already own TCGplayer which does all of this for trading cards way better than GameStop does, etc.
Perhaps somehow these things could be improved by GameStop but I can't imagine it being significantly better than it currently is.
No, why does it matter? I also don't know where my local GameStop is since the few by me closed a couple years ago :P
Plenty of stuff on EBay offers me 2 day shipping clearly via fulfillment centers, as far as I'm concerned that's all that matters. Do you think the addition of GameStop stores would mean EBay can offer faster shipping than that on a significant number of items?
You asked what could be improved with Gamestop. Public knowledge of Gamestop locations is a boon if people don't know where your existing fulfillment centers are.
Sellers what? You generally don't just drop stuff off at a fulfillment center, when you get to that size you're dealing with large amounts of inventory and you ship it to them.
If you're saying sellers could come into a GameStop to have their individual items packed and shipped out, I suppose, but:
1. They don't really have the space for much shipping volume at any of their stores.
2. You can walk into any USPS, UPS, FedEx, etc. store and do that already, you don't need an 'EBay' store. GameStop would presumably get the packages picked up by one of those carriers so it's not saving any shipping time or expense.
For buyers, in many cases there's already alternative drop-off locations similar to GameStop Ex. For UPS deliveries I can get them shipped to a bunch of different convenience stores near me. GameStop stores might be a nice addition to that list but it's not enabling something you couldn't do before, and I would think for most people they already have a closer location than a GameStop.
Well, look at what you can already do with their trading card program. You could just list cards yourself on eBay, of course. You could drop them off at a shipper to send them off. You could keep them at home while you're waiting for a sale, where I guess they're insured by your renter's/homeowner's insurance. And if you want them graded, you can send them off for that however you like, too.
Or, you can bring your cards into Gamestop, and they'll send them off to get them graded and/or buy them from you, at which point they become inventory for their lootbox. With eBay, you'd be able to do all of that, too, except you'd be selling directly to someone else through a consignment service - more pricing freedom.
And then you could start doing it with things other than cards.
I can't tell you where the nearest GameStop is because afaik they don't have any locations in my country. Can find half a dozen convenience stores that will handle eBay (or Amazon) goods for me within walking distance.
They are wildly different businesses. Ebay is not in the business of holding physical goods, they are a marketplace that connects buys, sellers, and shippers and adjudicates fraud, collects funds, handles taxes, etc. They are not a warehouse.
Gatestop is a retail operation that buys and sells goods. It takes on all the liability for fake products, it puts capital on the line to purchase used goods, it is a totally different (and worse) business
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.
"How do you make money? Spinoffs, split-ups, liquidations, mergers and acquisitions." - Mario Gabelli
Just sample from these with replacement sufficiently many times and you're all set. At the very least, you'll owe people so much money that they'll have a massive interest in helping you.
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.
It depends. If Gamestop is able to find the efficiencies that the CEO is claiming, EPS jumps between 50 and 100 percent. Gamestop shareholders get diluted down to owning a smaller piece of a much bigger earnings pie. That's if you don't engage in any conspiracy theories about how many shares retail traders really own (don't go down that rabbit hole).
Suffice it to say, the Gamestop's price floor has gone up each time it's been diluted in the past few years. Perhaps lower highs, but higher lows. And a company that can afford to try a stunt like this.
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 “
> the should-be-illegal process of putting debt on the acquired company's balance sheet.
I agree it's weird but ultimately the check against dumb lending is natural consequences for the lender, right? If you ask me for billions in loans for your zero revenue company and I give it to you, whose problem is that but my own?
The 2023 mini banking crisis has its own wiki page and it's quite informative. Of the three banks involved, one bank saw its shares drop 97%, another "shareholders lost all invested funds" and the third got auctioned off for pennies on the dollar. No investors were bailed out.
Banks go bankrupt all the time. Community Bank and Trust of West Georgia went bankrupt just 3 days ago. The Metropolitan Capital Bank & Trust that went bankrupt back in January. 99% of the time the investors are completely wiped out. Bailouts almost never happen, which is precisely why it's such big news when it happens.
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 of the same smells as other bailouts - weighing moral hazard vs systemic risk.
“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.
The problem is that leveraged buyouts allow me to effectively inflict that debt on other companies, making a buyout offer the existing shareholders won't be able to resist and then reorienting its operations around servicing the debt I took out. In fact, lenders arguably favor this, letting me use the company I'm acquiring as collateral to acquire more debt at better terms than would otherwise be available.
It's the problem of all the employees (and potentially customers) of the company being plundered.
They have no say in the matter, and given that the lender can probably absorb the loss without, you know, missing mortgage payments or losing health insurance, I would absolutely argue it's not just their problem.
You can certainly hold the opinion that "it's just business" but it feels like an unnecessary part of business that very often has real disruptive and detrimental effects on average working people, for the sole benefit of rich people getting richer.
And yes I get that it's not just a PE problem, but PE is a big one of these kinds of problems.
This is a fundamental misunderstanding of the US employment model. Businesses can do all sorts of dumb things that end up making them unable to continue to invest in employees. The check against that is the greedy owners.
Regulations designed to ensure businesses never take risky bets lest they have to lay people off would be a nightmare of unintended consequences and surely in aggregate hurt employment.
I assume the person you answered is saying that level of risk taking should be regulated. Not that no level of risk should be allowed if they have to fire people. Surely there is a point where you want some guardrails, so the C-suite has to at least take in account their employees as part of their risk assessment
Is the idea that big companies take too many risks today? If so, I’d love to see data, because the usual knock on big companies is they become dinosaurs and risk-averse, and therefore stop innovating and eventually get displaced by upstarts.
You're bringing your own conclusions to this, I never said anything about regulation.
I was just responding to OP who said that PE plundering via debt loading is only the lender's problem when things don't work out, and I assert that it is not.
Employees often pay a much more impactful price when PE-driven cuts occur (whether by design or because the plan failed).
The people who work at the bought-out company who will then be fired due to PE now gutting workforces to pay off the debt. Laborers are getting the shaft
Market cap will price in the debt, as it always does. Empirical evidence (dig through Google scholar) finds that cash assets, debt, profits, settlements, and the like, all are reflected in market cap changes at over 99% accuracy (the 1% is from measurement noise, so it may well be 100%).
Making debt of that form illegal would kill any company that needed money to stay afloat, such as during some emergency, or war, or COVID, or tons of events that companies regularly survive.
It is not at all clear to me why people get upset about using borrowed money on the balance sheet of the acquired company.
Say company B wants to buy company A. Company A is worth $20B, but the buyer doesn't have that much, and the original owners/shareholders want to get paid. So Company A takes out a $20B loan, paying out the original owners, making that company worth $zero. Now Company B gets it - it's still worth zero because of the fat loan, but now Company B is the owner. I don't feel like anybody got taken advantage of in this financing model.
In fact, this is pretty close to what happens in the US real estate market. When I buy a house I take out a loan against that house. It's non-recourse, so it's very much like the house borrowed the money, not me. In any case, I got the house with a lot less money than the purchase price. Sometimes nearly zero from me in fact.
I do understand why people get angry about what often happens next - layoffs and such - but I think that's very independent of the financing used to purchase the company. The acquirer could pay all cash using money from it's own bank account, and then still lay a bunch of people off - and in fact that often happens.
Yes...but isn't his employment contract structured to incent this kind of move? His pay is 100% at-risk in the form of 170M+ stock options that only vest if he hits some astronomical targets.
I'm just not sure his rationale is completely objective given such a structure...
> I'm just not sure his rationale is completely objective given such a structure...
Which is why the board would have to approve the deal and he can’t act alone on it. He was hired to create and execute the strategy including finding the target. The real question is, why did he get hired to do something anyone could have done?
If the market is "efficient", then the debt should work against the market cap. For example if we assume a $50B offer at 50%/50% debt and stock, then we should expect the market cap to only increase by $25B. And for GME shareholders, they should expect their stock price to stay roughly the same because that $25B market cap would be offset by a corresponding increase in the number of shares. The debt would increase the enterprise value of the company, which is the more comprehensive metric to use when trying to value a company as it takes into account both debt obligations and cash on hand.
Of course the market may move the price up or down based on how much they like the merger. If they think there is some synergy here, they may move things higher. If they think the debt is too burdensome or have other issues with it, they will move the price lower. But all things being equal, any market cap increase of a buyout should be offset by the dilution that was incurred to finance the deal.
What looks like a "hack" here though, is that Cohen tied his incentive structure to market cap and not share price. The fact that his award is in the form of options and not RSU's does add some incentive for a higher share price, but at the end of the day, it looks like he can get 100% of his award by simply buying companies using dilutive stock issuance. Not sure how much the GME faithful appreciated that at the time of the vote. I think Elon did something similar in his incentive package.
Whether the acquirer or target borrows the money, this would not allow to increase the market cap of the company. It would increase the enterprise value (because the debt allows you to make a bigger acquisition), but not the market cap.
I’m disappointed and surprised you left out half of the conditions that grant him this compensation. You only included the one that suggests that all he has to do is buy a bigger company with GME stock. It was literally the first paragraph of your link:
“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”
This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow, cumulatively, as well.
The first two market cap hurdle is almost certain to be achieved, and the second should be easy (its less than current market cap plus value of new equity to be issued).
I’m disappointed and surprised you left out half of the conditions that grant him this compensation and only included one that suggests that all he has to do is buy a bigger company with GME stock:
“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”
This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow as well.
It doesnt really change much, by buying a company its future ebitda will be included, it only delays the reward by some time.
So yes he can just buy a bigger company
> other than the should-be-illegal process of putting debt on the acquired company's balance sheet.
This is silly. No different than buying a house w/ borrowed money based on using that house as collateral.
Banks aren't stupid. If it's very likely to fail and the interest doesn't cover the risk, banks won't risk. There's typically no upside to banks. At best they get their interest and at worst they lose everything.
Even a cursory familiarity with the history of the industry shows both that this is untrue but also that it’s leaving out many of the core reasons why finance is regulated. Bankers do make mistakes, but also their focus is on what makes them a profit now rather than what’s good for their client or the country long term. The bank does not care if GameStop goes bust as long as that happens after the loans are repaid or, most likely, sold. None of the guys who sold incredibly dodgy mortgages—if you weren’t in the market in the late-2000s, they would literally let applicants pencil in their income and not check it—went to jail for packaging those mortgages up so many times removed that they couldn’t reliably prove the loan even existed and reselling them with inflated ratings, and absolutely none of them had to repay their bonuses. Once they found a buyer for an “AAA” derivative, foreclosure was a problem for the retirement fund left holding it after a couple of sales.
That’s what I’d expect here, too: they’ll make some flashy announcements to juice share prices (“AI powered auctions paid in crypto!”) and sell that debt, spin whatever’s left into a subsidiary which splits off, and then profess complete surprise when that goes bankrupt.
> Even a cursory familiarity with the history of the industry shows both that this is untrue
The modern trend of believing that “history” is made up of one or two things that everyone saw on the news is actually really entertaining. Definition of “cursory understanding” tbh.
The banking industry, historically is far from stupid.
This particular story is just basic PR driven market manipulation and has nothing to do with the banking system.
> The modern trend of believing that “history” is made up of one or two things that everyone saw on the news is actually really entertaining.
It would be useful if you could provide a more detailed version of your argument. I don’t think you seriously believe that banks don’t make mistakes but the way this is written does sound like you’re saying it’s highly unlikely while ignoring the other half of the sentence you quoted.
It is different. You need somewhere to live. Buying a second home with what would presumably need to be at least a 90℅ mortgage is at best questionable.
Cohen is already rich rich, his GameStop compensation doesn’t really matter much. The eBay acquisition could be a strategy to juice his compensation but I think it is much more likely he does believe that he can achieve his stated aims, which will financially benefit him much more in the long term.
> Cohen is already rich rich, his GameStop compensation doesn’t really matter much
I think this argument is much stronger in the opposite direction: if his motivations were not focused on accumulating wealth, he’d be retired or running some kind of charity once he was that far past the point where he had to work. The fact that he’s not suggests that he derives his self-identity from wealth and the guys who do that are rarely satisfied at mid-tier rich.
It’s not always wealth accumulation as driver. It’s often just chasing deals and fixing companies that is fulfilling for some people. But, it’s also the thrill of the hunt and he’s effectively a big game hunter looking for a huge trophy.
He wants to be the next Warren Buffett, I believe this is a stated goal, or at least he’s been very clear that this is his inspiration. He wants GameStop to become the next Berkshire.
I'm not sure the fact that somebody is already rich rich would make them less likely to perform ethically dubious practices to juice their own compensation. In fact I'd say the opposite is more likely.
Few CEO’s in the US are rewarded for longterm thinking when there are unsustainable quarterly gains to be made. GameStop also has a strange history, especially the last decade, that no one could possibly describe as “cautious” or “planning longterm.”
I also can’t name a single CEO who had the mentality of “I’m rich enough to make personal/financial sacrifices for the good of the company.” That’s simply not how things work. I’m sure an example exists but it would clearly be an exception to the rule.
Yes and it was 1) incredibly notable, 2) 13 years ago, 3) in another country, and 4) following one of their worst performing products ever. Iwata's (maybe voluntary) temporary pay cut was big news because of how exceptional it was.
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 sounds nice on paper but he isn’t really doing something revolutionary here. He also has rather ambitious numbers to hit if what I’m reading is accurate, so it makes sense he’s taking massive swings like this. We’ll see if it happens, let alone pays off.
Long-time ebay seller here. I'm seeing comments floating towards the top that are essentially positing that the physical GameStop locations can be used as hubs where people can buy or sell their stuff in general (especially items that are 'pick-up only'). A pawn shop, basically.
Thing is, GameStop is, well, for videogames and videogame paraphernalia. It's not a general store. Doing this would turn them into a thrift shop, not a pawn shop, as people are trying to offload their carpets, desks, etc - bulky stuff.
I don't think this makes sense.
This does make sense when you consider the collectable market, another domain I'm involved in. Trading card games, specifically pokemon, have exploded over the last 5 years. GameStop is making a killing off of buying, selling, and grading these cards. Ebay is the primary marketplace to buy and sell those cards. There's also tax free havens ("Vaults") offered by multiple companies, grading service passthroughs, and scalping offered through ebay too.
Viewed through the above lens, that's what's prompting this offer, I think.
I think a lot of people are missing that eBay bought TCG Player back in 2022. This would fold the TCG Player brand into GameStop. Many (most?) local game stores list their inventory on TCG Player. In addition to the physical stores themselves, GameStop would have their hand in nearly every digital trading card transaction. GameStop would own the TGC Player warehouses and inventory.
GameStop CEO was on CNBC and acted like a total dick the entire time after they asked him how financing would work for this deal [1]. It appears that he's upset that Squawk Box previously stated that GameStop is a bankrupt meme stock. This is probably one of the funniest CNBC interviews I've seen.
r/wallstreetbets has been having an absolute field day with this interview, gotta admit it's pretty hilarious.
I guess wallstreetbets can giveth (given they're probably the primary reason Gamestock even still exists as an independent company today) and taketh away.
I have to imagine that this performance was intentional and this guy is not just out of his mind.
Just find it difficult to imagine anything outside of market manipulation: either an eBay pump and dump scheme, or collusion to get investors to sell as the inflation comes down so activists can pick up more.
I did some digging today and learned that he currently takes no salary and stands to make an unbelievable amount of money if he hits certain (pretty unreasonable apparently) benchmarks. I think it was $35billion. My very armchair guess here is that he’s just trying something incredibly loud, brazen, and ambitious because at this point what else can you do? They’ve been falling apart for years, the business has not turned around at all even after the wildly inflated shares they sold to get some liquidity.
He’s already rich and GameStop is falling apart, so really what’s the risk to him if it all goes under? May as well try a moonshot and move on. It’s not like anyone will hold him accountable for failing to turn around a ship that was already deemed sinking many years ago.
Could be. But he has to secure board approval for doing something like this. So he apparently was able to convince the GameStop bod that this is a reasonable play.
One has to wonder if there's an unstated interested party ready to back the deal.
Very good point. While I’m very skeptical this will even occur or that it’s a good idea, there is certainly some logic to it. The question is are they all joining in a group delusion, an opportunity to make their final big bucks and walk away, do they really see a path forward, or is it something else entirely. I guess we will find out lol
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 KKR.
Basic formula is raise cash using junk bonds, buy company, fix up company or kill off costs, use money company earns to pay debt, sell company. Since you have leveraged, your payout can be large.
It's a similar style financing activity to a house flipper.
example: buy house for 1M, but pay $200K + 800K debt (mortgage). Fix up house, sell for $1.2M. Pay off $800K debt. You're left with $400K, or 100% return!
GameStop doesn't have (even close to) $55.5B. Their offer from the letter is literally impossible:
> Our offer is $125.00 per share, comprising 50% cash and 50% GameStop common stock
Even if you magically included all existing GameStop stock in the offer, it still would not comprise 50% of $55.5B.
EDIT: looks like it's not impossible and I misunderstood. It's a proposed change of leadership with a $25B injection of cash to sweeten the deal. GameStop would issue shares which would capture the original eBay value (since GameStop would own eBay after the trade), making that part a wash. At least assuming people owning eBay stock currently would value the combined company at at least the sum of their parts, which is a big if.
When the merger concludes, the former shareholders of eBay will have $27.5bn of GameStop-eBay stock and $27.5bn of cash. (“Cohen said GameStop has a commitment letter from TD Bank to provide up to $20 billion in debt financing” and “GameStop has around $9 billion in cash on its balance sheet to put toward a deal” [1].)
It looks like mutual funds pass the gains, and the tax, onto those holding shared of the mutual fund.
> Because mutual funds are pass-through vehicles, they are required by law to distribute most of these gains to shareholders each year. These are called capital gains distributions.
Other types of funds don't necessarily have this problem, or lessen it.
> Holding mutual funds inside an IRA, 401(k), or Roth IRA shields you from annual tax bills.
> Index funds: Passive funds trade less frequently, leading to fewer gains.
> Tax-managed funds: Specifically structured to reduce taxable events.
> Exchange-Traded Funds (ETFs): Use an “in-kind” redemption mechanism that avoids triggering taxable sales.
They own eBay + GME + some financial alchemy. If you aren't a financial wizard you should assume that the value of the financial alchemy is negative. (Because 99% of the time it is.) Now, what are the synergies of eBay + GME that outweighs the chaos caused by the merger and the finance stuff?
I’m not totally sure how it would be structured but if GME is the purchaser then the merged company would be listed under GME and eBay would become a brand in the GME group and no longer a stock listed under the eBay ticker.
The whole thing seems incredibly dubious and fishy. The eBay board should vote this down which is why the CEO of GME has already realised that and said he’ll appeal to the shareholders directly. If eBay wanted to load themselves with twenty billion dollars of unnecessary debt and extra complications which would kill the company then they could do it themselves. They’re not in that kind of business.
There is, literally, nothing fishy about this offer. It’s a cash and stock offer from a public company to public company shareholders. We could call the financial or shareholder benefits to ebay dubious (I don’t hold any opinion about this) but this is a very aggressive offer, and allows the chance for GME to keep some cash - if enough shareholders of ebay opt for stock, then they’ll have cash available after. Plus they’d keep whatever current net assets ebay has.
ebay was at like 100 before the offer went out, it’s trading up to 120 or so in early hours this morning, so speculators and institutional desks do not find this offer fishy or dubious - they are pricing it as likely to be pretty well received.
As a side note, one of many plays you might make in this situation is what Cohen has done here; they bought a bunch of options. Those options are now worth a lot; before the letter if it was all options, they controlled $2b of EBAY shares, today that’s $2.6b. We might imagine the options at least doubled the underlying return. The market had not priced in a rapid jump to $120 when he bought them. If the deal closes, then this will put at least another billion or two of liquid capital into GME.
TD Bank also believes it will work, i.e. return them a profit.
They've seen the detailed plans and I haven't. But they're the ones with real skin in the game. It seems like an opportunity for them to lose their shirts.
So yeah, eBay shareholders should take TD Bank's free money and run.
TD Bank believes it will make them a profit. Their interests are not those of eBay’s shareholders: if they can juice the financials long enough to sell their loan, they don’t care if the company goes bankrupt the minute after that sale closes.
That's just for the cash part. The stock part makes no sense. For this 50/50 deal to work in principle, they'd need to issue around a billion new shares, which would massively dilute the existing ~450M shares. So Ebay shareholders would suddenly own 70% of Gamestop after the deal. It's also highly questionable if investors actually believe the combined stock is worth that much, so the stock price would probably fall and turn those 70% into >90%. At this point it basically becomes a reverse acquisition plus a large loan for the final company from the cash part of the deal.
This is not atypical; smaller company “buys” the larger company with debt on the larger company’s books. The blended shareholder mix is mostly the larger company; management comes from the smaller company.
The one I was most familiar with was the Discovery “acquisition” of Warner Brothers. Though apparently that’s a little complicated because AT&T was divesting itself of Warner.
When the SEC filing is made, we'll get to see how the deal is structured. The $20 billion from TD Securities becomes a debt obligation of the combined company. There's a tax break in equity to debt conversion, and a second tax break for carried interest. [2]
There may be a preferred stock deal or debt refinancing so that TD gets their $20 billion back. Usually, the private equity firm exits within a few years.
Sure it is. The acquirer is borrowing money for the buyout, and the debt will become a debt of the acquired/merged company. That, by definition, is a leveraged buyout.
No, unless any control transaction using any leverage counts.
A third of the deal is financed with debt. A fifth is financed with cash. The bulk—fifty percent—is being financed with equity. An LBO would see debt and a thin tranche of cash finance the bulk of the acquisition.
How is a 20bn company going to issue 27bn worth of stock? Or are they just going to pretend the newly issued shares are valued the same per share as existing stock is right now?
Because it acquires an asset worth roughly that much, it’s neutral. GME is (probably!) not doing a huge at-the-market offering, they’re creating the shares and immediately giving them to eBay shareholders.
In practice the price paid for the company being acquired is usually a bit higher than the market value (so the shareholders take the deal), and the market usually punishes the acquirer a bit and the resulting entity’s stock will fall a bit. (This is most definitely not investing advice.)
Both stocks went up in value after the announcement, so it's a good sign that if it comes to it, eBay stock holders would vote for a merger, because they value the combined company at at least the sum of their parts.
why do i keep seeing comments of this sentiment? can't they just take loans? I thought there were serious consequences to making an offer, and then backing out , especially if the other party accepts your offer.
… and the stock has not dropped 39%, in fact it’s trading about where it was a year ago. Shareholders have been content to let Cohen add to the balance sheet, adjust operations and make a large move. This is one such move. And GME is up 5+% in pre trading, so shareholders are generally positive about this idea.
If Cohen's "large move" was to buy EBay, investors could have done that themselves. They would have gotten a better deal on shares in the new company. Also, they'd be up 50% over 12 months. Partly because Cohen "adding to the balance sheet" has meant dilutions, and there will be more for this deal.
Yeah this is the funny part to me - if you thought EBay was an amazing business then you could have just bought that stock months or years ago. Maybe the combined company will really be worth more than both companies individually, but for the most part this is just GameStop deciding how you should have invested your money months ago.
Technically, we only know that the marginal non-shareholder is 5% more positive about the idea, since the price represents what the marginal buyer and seller are willing to transact at. The only shareholders involved in the increase are actually selling.
I operate under the delusion that it was a $400 gamble and there is no point selling stock that I forgot I even owned at all, when it's such a small amount.
Perhaps that is part of the scam here. Meme stock buyers will think this means something and will spend more on worthless shares so that ebay executives can sell.
Yes, that goes into the '50% cash' part of the offer. With a 20B credit line and 7.5B cash from their own coffers (which they claim to have, so let's believe them on their word there), you cover the cash portion.
The issue is the non-cash portion of the offer. They claim that the remaining 27.5B is covered by GameStop stock. But that's more than double the market cap of GameStop.
The non-cash (stock) portion of the offer needs to be valued against the resulting entity, which will own eBay. This will likely result in current eBay shareholders owning half or more of the resulting entity. (Though we don't know specific numbers yet). That's normal for a M&A where the smaller company is doing the buying.
> So you're just outright accusing GameStop of fraud?
I have no idea why you interpret my words that way. I just meant that I didn't want to analyze the cash portion of their offer any further and just wanted to take it at face value.
It's like saying 'tobacco allegedly causes cancer' - the proof is very public and available. The typical reason for saying it like that is to indicate you don't believe it.
With the approval of the board of directors (in most cases), a company can simply create new shares and give them to whomever they like.
I would guess that this information will bother you.
If it helps, because many public company executives are compensated on earnings per share, most C level teams are incentivized to buy back shares, thus decreasing the denominator for the EPS calculation without changing fundamental economics of the company.
If this also bothers you, you should guess what Buffet says and thinks about those two dynamics, and then read up on it, and you will learn something interesting about public markets!
Are they under any obligation to ground the value of their own stock or can a salesman simply claim that the "true" value of that stock is much much more than it currently seems to be?
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 impossible?
>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.
I imagine the vast majority of us do not have a problem understanding smaller companies can buy larger ones. Most of us are just incredulous that anyone is taking GameStop, especially Cohen, seriously.
Why wouldn't they? Before he showed up, Gamestop had years of negative earnings per share. They haven't had a negative EPS quarter in almost 2 years, now. That seems like a serious turnaround.
You’re omitting the fact that they’ve had declining revenue YoY 4 years now, with no sign this won’t be year 5. Their liquidity is primarily the result of leveraged debt and sold off shares. They have had to seriously downsize, including shuttering tons of brick and mortars.
You’re picking one single metric that’s not even consistent for 2 years to assess the health of the company. It feels rather cherry-picked. The whole story is very rough for them right now, they’re in trouble.
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.
Speaking as someone who used to know absolutely nothing about the world of high finance, yes, it is too much to ask.
Before I started paying attention to such things I wouldn't have known a single one of those terms to even begin googling.
And let's be honest here. A smaller company saddled with big debt buying out an even larger company really doesn't make logical sense. It makes financial sense, which is subject to different laws of mathematics, probably involving the waiter's check pad in an Italian bistro.
Agreed that Marvin would find this (and everything about Earth) ridiculous.
I propose this would make sense in the animal kingdom though; large, lumbering fatty walks along. It has big claws, but … it doesn’t look like it can be bothered to be dangerous anymore. Meanwhile a pack of hungry successful hunters walk alongside. To take this down, they will risk pretty much everything..
It’s the same story. The shareholders provide a sort of bet on if the big guy has still got it, or the risk-on hunters do.
That’s why the operational results got attention in Cohen’s letter — he’s telling Shareholders: “I turned around GameStop. I can turn this ship around, too.”
GameStop has zero debt and billions in cash on its books. It is not a stretch for them to be making this offer. It really does make sense here for both sides.
> A quick search for how leveraged acquisitions, stock-for-stock deals, financing commitments, or tender offers work would answer most of the objections.
Isn’t the assumption that it’s impossible intuitively justified if you have no background in finances? A small fish usually can’t devour a bigger fish either.
Also, all those terms you mentioned mean nothing to me. You can’t search for what you don’t know exists.
This is just a leverage buyout and it will likely result in the slow death of both parties while there is value extraction for those in control. Think Sears, Toys R US and similar.
The CEO has a very specific deal where he gets paid significant compensation for specific valuations, which this is likely to achieve. That is value extraction at the cost of shareholders who will be on the hook for the leveraged loan and which will likely wipe them all out over time.
He has to hit both the market cap and EBITDA for each tranche of his compensation plan to vest. He could do this by growing the core business, or by doing a merger like the proposed eBay one. Even if such a merger was very dilutive, even value destroying, it could help him vest a tranche he otherwise would not, for more value than the dilution reduces his position.
To be absolutely clear, I hope+think in practice that he is aligned with shareholders, especially given that the market cap restrictions appear much easier to hit than the EBITDA ones, but it's important to be precise because there's so much misinformation going around.
Well, how much more value? It seems like an awful lot of work to make thousands, if not millions, of shareholders very angry with you, if he's just adding cents-per-dollar to his net worth.
I'm not saying that that isn't his aim, and I've definitely considered that a Vader Imposition is in play. But it seems like there are easier ways to make that kind of money without becoming Public Enemy #1, smack-dab in the middle of the "eat the rich" zeitgeist.
I see praise on Reddit (by GME stockholders, of course) saying that this makes him appear like some tough rebel standing up against the evil mainstream media... but I'm really not seeing it. To me it seems like a very tired (inebriated?) guy in a leather jacket who can't comprehend or answer a very basic question. Is this what passes for being a good CEO these days? I'd expect them to be able to at least come up with a vague response instead of claiming they can't comprehend that one number is bigger than the other.
2021: a Reddit short squeeze kept GameStop from going under.
2026: GameStop is bidding $55B for eBay, a company 4x its size.
If it lands, this might be the strangest full circle moment public markets have ever produced.
They have not made a ton of money yet, but they have turned the business around in a significant way. Where GameStop lost money every quarter from 2019 to 2023, it has now had 8 profitable quarters in a row.
The fact that investors are giving GameStop money is a good thing for GameStop; It is a signal of confidence. It is not a detriment like you try to position it.
They also just closed another 470 stores this year. Sales are half of what they were in 2019.
Basically they got a huge cash infusion from memestock hodlers trying to get to the moon. Greater than half of their profits are now from the interest on that money, which is wild.
However, the retail business itself is still failing because no one buys video games at the mall anymore.
It's not an answer to the question of a turnaround, and therefore low quality information? How much you have in assets does not correlate with the ongoing success of the business. Examining the day to day business of Gamestop and excluding the memestock shenanigans leaves a very bad business.
The core business has declining revenue - net sales 2016 $8.6b, 2025 $3.5b and still in decline. Cash flow from operations also continues to shrink.
Store footprint has shrunk.
The underlying business stinks, even if they made a ton of money selling stock, they haven't done anything significant to halt the spiral.
Perhaps a simple analogy would work here - you made $86,000 in 2016, and had a $6,000 surplus that represents your profit. In 2020 you made $50,000 and spent $5,0000 of your savings to stay afloat. You shrink your lifestyle. Now in 2025, you make $35,000 a year, and have a $2,000 surplus. There are no prospects for more income and you expect to earn $32,500 next year, and maybe $30,000 the year after. Would you consider this a turnaround for your finances?
Likewise, the company's revenue has declined ~60% in the last ten years, and declined 5% from 2024 to 2025. The business became marginally profitable when they shrank the business by reducing operating expenses and produced a small profit.
There are no significant avenues for growth in their current business model, revenue will continue to decline, as it has for the last ten years because the core model of re-selling used games continues to shrink. As revenue decline continues, they'll run out of people to lay off and stores to close, there will be no profit because the revenue is too small, and the company will BK.
There is no turn around, the company continues a death spiral.
You seem to be making some of your statements as if they exist in a vacuum. The context is easily half the story.
For instance, do you know where that $9 billion in cash came from? It was not revenue I’ll tell you that much. Their revenue has been rapidly dropping, they’re shuttering stores, etc. They didn’t get that cash from successfully turning around operations.
Another interesting observation to me is not that Gamestop was able to go from this full circle moment but rather the fact that Reddit has such influence that it was able to create the conditions which led here.
If Gamestop is the king, then reddit was the king-maker.
Many people noticed the math doesn't add up, e.g. in the CEO's interview here [0]. Am wondering if they are betting on the stock going up because of the news so they would then be able to fund the deal.
I think Ryan handled that badly because he didn't believe the question was serious.
They're offering 50% cash and 50% stock. At an eBay valuation of 56B: 20B of cash will come from their creditor, TD Bank. 8B will come from GameStop itself. 28B will come in the form of stock from the resulting entity, which will own eBay and presumably have a valuation north of 56B.
The resulting entity may end up having 50% or more of it's equity allocated to the existing eBay shareholders. This is normal for a M&A where a smaller company buys a larger one.
This was not on my bingo card. Not sure why eBay would take this personally. They've had a solid couple of years and there is room to grow. Gamestop on the other hand I'm not sure will exist in 10 years.
Data center build-outs and AI investments are huge. They make the combined numbers look almost normal, but if you're not in the data-center construction business, the US is already in a recession.
Is this LBO a ridiculous enough of a proposition that you are going to email your senator and or representatives to complain about LBO loopholes in corporate finance law?
Do they have the cash to buy them ? If not, why should we provide the limited liquidity that our banks have to finance this?
This logic should apply to all corporate acquisitions. You want to buy another company? Use your own cash and equity. No need for us to be exposed to your risk.
This will also reduce the predatory private equity takeovers.
eBay isn't doing itself any favors these days, the site seems to have issues on a regular basis and they're heavily promoting collectible/gambling garbage on the site. If anything eBay and GameStop seem perfect for each other.
There's tons of stuff I wanted or needed that was easiest to find on eBay. And I also sold old things there. Idk idc what the market for anime trading cards looks like.
The hard part is seeing the strategic coherence. GameStop plus eBay is not obviously absurd on marketplace grounds, but the scale and financing make the whole thing feel very strange.
Not sure where the synergy is except that both sell used stuff. For their market shipping speed doesn’t matter and so their large store foot print is not useful either. This is just a play to become more meaningful and to have actual revenue.
If it means eBay stops front-loading every search I make with car parts in thier latest market 'pivot' I'm for it. They can dispense with shoving the tacky 'live auction' stuff and constant 'are you sure you don't want to sell something', even better.
> ...sneaker company that pivoted to data centers set the 'weird' bar pretty high...
"Weird" is the wrong word for Allbirds. "Fraud" is far more fitting. They obviously have no intention running an AI-datacenter business and are doing it for the stock-price rush. A small number of people will be laughing all the way to the bank, and everyone will forget Allbirds in short order.
Ebay has a history of being legit, though they have had a long list of uncanny acquisitions themselves (including Skype, which they later sold for a stiff loss). It's a pity they couldn't just execute on their core business and are now being acquired themselves by an entity using sketchy financial shenanigans.
Who's going to stop a few rich people with a pile of money and a stated intent of doing something they have no intention of doing? No one, I guess. I mean, there's plenty of examples. Supermicro is still listed on NASDAQ even though one of their founders was caught smuggling export-controlled GPU's in Supermicro servers to the tune of 2.5 billion dollars a couple months ago.
eBay currently allows (or at least tolerates) sales of items not in the possession of the seller and are effectively lottery tickets. Lotteries are illegal in my state (NV) but eBay does not restrict me from bidding. That's low hanging fruit right there.
Because it works great as a platform, and because I've been using it for 20 years.
But for a new user, it looks completely messy, with pages that are vastly different from each other and many sections that look exactly as they were in the early 2000's.
I'm not sure 'it looks like it did in 2000' is worth tearing it all down, starting over, and introducing new bugs. Sometimes things just work. Ebay is very functional for a huge amount of commerce. It loads reasonably quickly and is reasonably easy to navigate.
If I understand correctly, I think the collectibles market is more in line with what GameStop is looking at here. They recently got into the trading card game including grading services via PSA.
Yes, so much so that cards that were sold at retail in 2024 after grading sold went from around $100 in cost to well over $1000 in 18 months, and this was me making the market. The prices have since 2.5x-ed on the same card (2024 Topps Chrome Sapphire Base #500 PSA 10). It's correcting a little, but a 10x rise on a card that is effectively not considered limited edition and most had placed in storage suddenly 10x and then 2.5x is quite rare, especially since it's a new card.
These are just public sales. Private deals are done with agents on both sides routinely and without any reportage. There's an element of gambling to most transactions but on the origination side, mostly because Topps, who owns licenses to the major sports leagues, are neither timely nor accurate in posting pack configuration odds, and seems to somehow have nobody competent enough to properly ensure that the same cards don't all get clustered in the same box. On multiple occasions I've bought cases where 3 out of 10 cards of a player were pulled, and multiple 2/10s. The checklist is only 100 cards. The case had 384 cards total. It's downright negligent, but screw the consumers, right? Thanks, Lina Khan, for making it all happen.
There's money to be made but it's a lot of dumb money mixed in with some very sharp acquisitions. Who knows how it'll play out. The market is inefficient largely because USPS is effectively a crapshoot in a time-sensitive market. The likes of Courtyard.io have only partially caught on, and ArenaClub, their competitor, ran for 2 years where a bookmarkelet allowed the user to turn what was supposed to be a random draw into a completely predictable purchase at way below market. Upon reporting, they just added a line in their ToS that put users in theory on notice. They did not fix the bug. They don't even have a SECURITY.md. The company served so much unnecessary data on their API that I now have Steve Nash's personal cell number, among others, before they designed their front page.
There's a gold rush going on but this really should be a hedge. At some point the market correction will screw over a ton of people.
It's basically an offshoot of the same appeal of crypto/NFTs but you get something to look at, I guess, and the grading companies make good money off of it.
A quick google says 320 billion in 2025 and is projected to grow to over $535 billion by 2033. I didn't know it was that big but it makes sense. Gamestop has been all in in collectibles and eBay has a huge market on it as well. I think this is the play. Both companies being profitable doesn't make it a bad deal for the number one collectibles company in the world.
I have followed from side and it feels like NFT craze hot. With some parts like Pokemon cards being insanity with regular fights, people hiding in stores and so on.
It is a multi billion dollar market with Ebay being key secondary market with Gamestop angling for same.
eBay is too easy to take for granted if you've never tried buying or selling things on FB Marketplace or Craigslist. Having people over the internet trade things with minimal middleman is a really hard problem, and someone will always get scammed somewhere.
If they can do some accounting trickery to pull this off then they deserve it. Makes zero sense to me but I did not think GameStop had even close to that in assets.
It's the leveraged buyout playbook. You buy a company and use its own assets to secure a loan. Then you "find efficiencies" (strip it for parts to pay yourself and the creditors).
In this case, if the deal goes through at the price given, eBay's liquid assets are untouched. The cash portion is paid out entirely through the loan and Gamestop's cash.
This debt will carried by company resulting from merge. It might be not classic leveraged buyout but if they have any trouble with repaying it, it will end in asset liquidation all the same.
There is no way that this deal will go through. However, it is good publicity stunt! Their offer is only 20% above the current share price, and they don't have nearly enough funding to complete the transaction. I would love to know what rate TD Securities is willing to lend? What would be the spread over 3month USD LIBOR? I assume 300-500 bps.
I was seeing the news about this calling it GameStop eBay takeover and I assumed it was eBay buying GameStop and I was like, huh that doesn't really make sense for eBay to buy GameStop but maybe they want the physical locations?
How the hell can GameStop buy eBay, this is insane.
The other way around made more sense to me as well. I don't see this going well for eBay, but I also don't entirely know how well their business is doing.
Here local eBay "clones" aren't in a good place and have been left as ghost towns after Facebook Marketplace.
Is eBay just a hive of scams now? Try searching for a Mac Studio with 512gb of RAM for example. I know it's a highly sought after item, but there are so many sellers with 0 reviews supposedly selling these at suspiciously low prices. What's going on here?
I bought some dope weight lifting shoes last week. 46 bucks after shipping, 175 new. I’m pretty stoked on that. I was looking for a 3090 recently too and i did see the 0 rep sellers with buy it nows 10% under market value. That was a little sus. Nonetheless https://www.ebay.com/help/policies/ebay-money-back-guarantee... is a thing?
The sad thing is it could succeed. This is exactly how Putin put the apparatuses of Russia into the hands of his allies. I'm sure GME will get administration support, any white knights will get Netflix treatment from the FTC. Cohen, as a loyal MAGA supporter, would then use Ebay cash to support Trump aligned groups.
The Gamestop CEO is an interesting character, he grew Chewy and sold it, did a massive play on Apple stock during the pandemic and used that to buy a 9% stake in Gamestop over time, rode the hype to accumulate $9B while turning the company around and closing stores that weren't profitable and making it a money making budiness again. And now they already own 5% of eBay on top.
Along the way he says some ridiculous Trump stuff and wasted a bunch of time on NFTs but the eBay play seems interesting at least. It's one of the best internet soap operas to follow. For comparison AMC was put in the same "meme stock" bag at the time and you can see how they managed to ride the hype. So it's not just memes.
The revenue for Gamestop continues to decline, even if they are "profitable". The annual decrease in revenue continues. It's a dying business, it hasn't been turned around. The most charitable comment you can make about the company is that they've shrunk the business to align with their revenue decline.
Have you used eBay in the last few years? It's awful for sellers and awful for buyers. This is coming from somebody who buys on eBay twice a month on average.
I try not to use it and then something will come up and I use it. Could be my market, or who knows what but there seems to be more scams.
It’s the only place someone can give you a fake tracking number (somehow people get these from UPS) get caught and other than a refund after weeks and a negative reputation ding, they get to keep on doing it. The fake tracking number scam has been going on for years too, it’s still happening. Permanently ban for people caught doing this, preferred shippers with eBay as a managed tracker or something like that.
I have never had this happen, but I don't buy from first-time eBay sellers. There are definitely scams on there, but they seem to be "too good to be true" prices with 0 reviews on the seller.
Surely you're not getting scammed by sellers with lots of reputational history?
I actually am more nervous as a seller, as their buyer protection almost always sides with buyers, at least in the US (and the fee is astronomical.)
Well, a month ago was my last use for about a year. A user with a 96% positive feedback and definitely a lot of sales slow played and then issued a fake UPS tracking number. The negatives in their history sounded mostly like communication issues so I assumed they were okay. They sell a lot of things in the $30-$90 range, this was a $200 item they had listed for $145, and they supposedly had a couple of them. A local store ran a sale around the same time that has it at $150 so it wasn't crazy. Upon deeper inspection of their reputation once things got fishy, they have 150+ sales, 4 negatives, 1 neutral. There are real looking positive feedbacks but about half are automated positive feedbacks. Not sure entirely what that means.
A refund has been granted but ebay's computers show that someone in my zipcode has also recieved a package (mine should have been 20lbs, the one sent was 2lbs and received by someone with a different name) so I'm kind of expecting a little more drama before it's all said and done. To be fully transparent, it was marked shipped without tracking and has an estimated arrival date of 10 days; after 10 days I asked if it had shipped and was told no and offered a refund and then it became marked shipped with a fake tracking number and "was delivered." The short of it is they're a somewhat prolific seller, I can't think of any reason it issue a fake tracking number and they had my money for about a month. I'm getting the money back but I'm back to square one. The sale at the local store ended.. It's not that big of a deal, just annoying.
It seems like there are sort of 2 classifications of bad experiences. There are poor descriptions, slow transactions, shipping mix-ups, mis-communications and things of that nature. A reputation ding is probably appropriate. Then there are more fraudulent things and ebay has chosen to not really punish those things and let them go, same way Amazon will gladly list and sell fake goods.
As a seller, the buyer can claim that the package they received was empty or just had a brick or whatever, and eBay will almost always side with them. I have multiple friends who were been hit by this.
It's not great for sellers either. I was banned during the time period before the Paypal divestment for having the galls to subpoena a nonpaying buyer's records. They take a cut from both sides. Sotheby's takes 10.5% (I think). eBay takes twice that for something comparable in value.
And yet, it's still the place to go to buy anything secondhand or used. I'd go so far as to say eBay could be nationalized under the Defense Production Act due to the critical role it plays in manufacturing by keeping obsolete manufacturing machines running.
The original shorting of GameStop back in 2021 gave them a bit of a boost back into the green. While people were doing the GME to the moon, GameStop made more shares to sell, and paid off a bit of its debts, I think it made about a billion dollars in profit, they're still struggling, but it helped prolong their life.
A friend of mine also pointed out and this made it click for me that it makes 100% sense, GameStop is setup as a legal pawnshop in every state. So a pawnshop buying out eBay makes insane sense.
This merger in theory could be good for both eBay and GameStop if they don't mess it up. Imagine being able to list your eBay items locally without having to have people needing to come to your house, or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
I could see this working out decently, assuming the CEO of GameStop doesn't mess it up completely.
"I think it made about a billion dollars in profit"
It raised over a billion dollars of capital (i.e. issued shares in return for cash). It did not make a billion dollars in profit (and has never had a year when it did).
Key financial results for Gamestop from the recent fiscal year (2025–2026) include:
Operating income was $232.1 million, not $285.9 million.
https://investor.gamestop.com/news-releases/news-details/202...
That total revenue also declined 5% YoY
Total revenue declined because they closed stores. But income went up because those stores were losing money.
They also made a lot off of interest on their cash, but that is going to get cut by about 30% if this goes through, as the combined cash position Gamestop has access to declines from 9 billion to 6 billion. Or so I've heard.
Total revenue has declined for several years, -27% in 2024, -11% in 2023 (2023 rev was $5.9b, to $3.6b in 2025, this is a shrinking business).
They haven't had a genuinely good year in the last 15 years.
Their TTM revenue is down 66% from what it was in 2012.
In nominal dollars. In real dollars it's down 75%.
https://www.macrotrends.net/stocks/charts/GME/gamestop/reven...
And yet...
https://tradingeconomics.com/gme:us:eps
(Macrotrends has it, too.)
What's more important, revenue or profit?
Look at the 10Y. Still crap. No matter how you look at it this company is a dog.
What can you expect from an AI generated comment? Correctness?
You can't normally describe it as profit because stocks by rule trade at a fair price, but it's surely reasonable to consider in this case GME making a profit from the squeeze given they were selling a good well above fair acquisition price.
no, they issued more stock. stock is a claim on corporate equity, ie the delta between assets and liabilities. existing stock holders' claim to equity gets diluted when this happens, but share prices will often not be effected proportionally, making it appear the company has "made a billion dollars" when in fact they've just split the same pie into smaller pieces and managed to sell it at the same price. ryan now seems to think he can issue shares to acquire ebay, which will be much harder than fleecing retail.
The TLDR for people who don't intuitively understand why: existing shareholders are diluting their stake in the company by issuing new shares and getting money for those new shares. It's simply selling part of the company. Not profit.
You're conflating two things here.
Yes, in 2021 GameStop did sell shares to raise cash in a dilutive way. [1]
No, that is not being treated as profit or revenue.
Gamestop had ~418 million in profit in 2025. [2] A fraction of that profit does come from interest income. Ignoring that (say to value the business separate from the cash) they still made ~110 million in profit.
In my personal opinion (not financial advice) Gamestop with the cash it has today is a much more attractive investment than without. If you have worries about an economic downturn, it's a hedge. If you worry about GameStop being able to maintain it's current revenue/profit or volatility, it's runway. There's a variety of ways it reduces the risk of an investment.
[1] https://investor.gamestop.com/news-releases/news-details/202...
[2] https://www.sec.gov/Archives/edgar/data/1326380/000132638026... page 27 has the consolidated results.
>A fraction of that profit does come from interest income.
More than half of it came from interest income.
Gamestop has been unable to grow revenue since Cohen took over, failed initiative after failed initiative. The only thing saving them is their meme stock nature and a legion of people willing to throw good money after bad allowing them to dilute shareholders to build a warchest.
They have increased profit by closing something like 50% of their stores but you can't grow a retail company by constantly closing stores at some point you have to find a way to make the stores more profitable and in 5 years with tons of different attempts they've not found that. Revenue is down almost 50% in the past 3 years.
Having a pile of cash doesn't matter if you have a leader who has no good ideas for how to invest it to improve returns for shareholders, all it does is allow you to die for longer.
Not growing revenue yet being profitable seems far preferable to growing revenue yet having bigger and bigger net losses.
Shareholders seem to agree, as the stock went from formerly around $2.50 to present day about $92 (accounting for splits), dispute the dilution.
Tightening your belt is a good thing. No disagreement there but it has a hard limit. You can't just keep tightening the belt and growing profit, at some point you have to start revenue expansion again and from what I've seen Gamestop has no way to do that.
At $2.50 they had massive amounts of debt they couldn't service and a very real chance of going out of business. Then through pure luck they became a meme and were able to extract $10b from investors so of course they are worth more today. There is no growth story though so as meme investors get bored and move on it will move back down to it's asset value unless they find a way to grow again.
The meme investors can stay irrational long before gamestop gets a growth story. If they haven't given up on their get rich quick scheme that's lasted over five years now, I really don't think they're going to jump ship now.
The sad part is that gamestop is offering 55 billion, yet only has 9 billion in cash. The only way they come up with that much capital to buy ebay is to dilute the existing shareholders to a point that "to the moon" will just be moondust.
I was assuming it was going to be an LBO? Surely they don't plan to raise the money in cash.
>Not growing revenue
Not growing revenue would be one thing, they're shedding revenue at pace - 50% decline since 2020.
> Shareholders seem to agree
First, it's a meme stock. The market can remain irrational for long periods. Another way to analyze it - almost all of the market cap of ~$10b is the $9b in cash. The shareholder pricing tells you they value the business at it's cash assets.
Gamestop's business of physically selling video games, consoles, etc is a dying/dead industry. Nothing can change the trajectory of the market that is almost completely disappeared.
It's a Blockbuster or Tower Records, a dead business running on fumes and memestock valuation.
Well hey, what do you think about them buying eBay? eBay seems to think a lot of the value is in verification - grading cards, authenticating watches, shoes, handbags. GameStop has a similar business in collectibles and could provide eBay with a physical footprint that would let a lot of that verification happen easier, in-store.
The verification stuff is minimal. That's not where eBay makes it's bulk of money but it's a reasonable growth area. There's a huge opportunity though for eBay or someone to tie several loose ends and concepts together and have a serious competitor to Amazon.
I honestly don't know anything about ebay these days to comment on them but many many people have tried to make a business of providing a storefront for ebay in the past and they've basically all failed so I don't think that bodes well for the main offering Gamestop has.
Also Gamestops verification business is not done in stores AFAIK. I'm pretty sure they've just partnered with PSA to allow you to drop off cards at stores but they are sent away to be authenticated. The stores don't really add any value for most people in this transaction and add a potential downside in that there are multiple reports of Gamestop store employees stealing cards handed over for grading.
Training retail employees to be proper verifiers seems like a huge risk and a huge cost since you need to train them up on how to handle everything where with centralised grading locations you can have specialists(think antiques roadshow).
Worth also pointing out though that if you can sell new shares above intrinsic value that is accretive to existing shareholders. Dilution isn’t always a bad word. (It’s bad for the people buying new shares.)
Yeah I'm also always confused whenever I heard that a company issues new stocks. Why would existing shareholders agree for that? If there's more comprehensive resources about this I'd love to read it.
Well, partly it's an audience thing. Hacker News has a lot of folks who work at tech startups, and if you work at a tech startup, dilution is nearly always a very bad word for you.
If you work at a tech startup then you probably hope your company raises an additional round of funding, i.e. you hope you get diluted.
Isn’t that done with already existing shares (from the founders)? Then it wouldn’t be dilution.
No.
The main purpose of a funding round is for the company to sell shares and receive cash (e.g. to spend on marketing), not for founders to sell shares and receive cash (e.g. to spend on Ferraris).
(Sometimes, at the same time as a funding round, founders may also sell some existing shares to the new investors.)
Basically a ponzi at that point
Bubble? Yes. Ponzi? No. The latter requires some element of deception/fraud. Strategy Inc. (formerly MicroStrategy) was basically something similar. They had $x worth of bitcoin in a vault, but were selling themselves for $2x.
Well they are raising capital to hand out in dividends on their preferred stock. So that's much closer.
> GameStop is setup as a legal pawnshop in every state. So a pawnshop buying out eBay makes insane sense.
It doesn't though. eBay could easily set itself up as a legal pawnshop in every state if it wanted to. It doesn't because there's no advantage to doing so.
There are already third-party sellers in many areas who will take your physical merchandise and sell it on eBay in exchange for a cut. eBay doesn't need to enter that market, it's simply not profitable enough.
You're right that there's no real advantage to eBay buying a pawnshop conglomerate, but a pawnshop conglomerate buying eBay gets a massive advantage. They're already sitting on a mountain of used inventory, and at some point a lot of it will be thrown away because there are no local buyers for it. Having a commission-free way to offload that inventory would be huge for them.
Ebay commissions are not that high, 13.25% for most items.
The barrier to listing huge amounts of merchandise is not the commission, but rather the amount of labor it takes to list and price everything and pack and ship it and deal with refunds and returns for items that turn out to have problems. And how a lot of items are only economical to sell locally, because when you add in shipping costs it approaches the value of buying something new.
Buying eBay doesn't provide any kind of easy way to help offload inventory at all. The way inventory is offloaded in bulk is in bulk pallets sold at auction, where people bid on them and then do all of the grunt work involved in photographing and listing and packing and shipping. Which is a significant proportion of sales on eBay today. GameStop can easily auction off pallets of their merchandise if they want, today. In fact, there's a good chance they already do.
> Ebay commissions are not that high, 13.25% for most items.
13.25% isn't zero.
> The barrier to listing [is] the amount of labor it takes to list and price everything
GameStop has a surprising amount of technology around their pawnshop activities. My son traded in his laptop last month and they had him wipe it, enable developer mode, and plug it in to do automated tests and make sure they knew what they were getting. They're already doing the labor to price everything. They're not going to have people type up listings, they'll just automate posting off of their inventory system.
> when you add in shipping costs it approaches the value of buying something new.
They get to skip the shipping costs. You could choose to have them ship the item to a GameStop near you which would cost them pennies. This is an advantage of having stores in every city with a population over 50,000 in the US.
And a huge amount of the stuff that GameStop buys and sells is out of print. Buying new is simply not an option when you're talking about a game that was released 6 years ago only on physical media.
> The way inventory is offloaded in bulk is in bulk pallets sold at auction, where people bid on them and then do all of the grunt work involved in photographing and listing and packing and shipping.
There must be money in the margins here. Otherwise people wouldn't do it. GameStop has all the technological ability to cut out this grunt work.
I'm just saying, 13.25% isn't the barrier here to making this work.
And shipping things to a "GameStop near you" does not cost pennies, and most people hate having to pick up packages. The reason that can be cheaper for regular stores is because they're distributing from central warehouses to those stores anyways. If GameStop is holding inventory trapped in all these physical stores, shipping an item from one store to another is no cheaper than shipping it directly to the customer -- e.g. it's edge node to edge node, not central node to edge node.
Interesting discussion. Something it made me think about is trading cards or other items you typically might want to sell as graded items. If you’ve got a physical GameStop with the digital eBay footprint maybe you’ve got the makings of a nice little ecosystem for selling Pokémon cards, video games, antiques, and other items in an inspected condition.
Neat - Setting up a eBay account for your company doesn’t cost $55B. I’m available as a part time CFO from now on
But the brick and mortar distribution is hard to build and gives a structural advantage. As another poster pointed out, you could sell your items locally and not need to deal with shipping, communication with buyers and other stuff. It would reduce friction which might actually expand the marketplace significantly. I personally have multiple family members that throw stuff away because listing on eBay is too hard and pawnshops too sketchy
Why does it give structural advantage to own a bunch of dead mall and strip mall brick and mortar stores that have been on the verge of bankruptcy for well over a decade?
They haven't been on the verge of bankruptcy since they paid off their own loans. This deal will actually be the closest they've been to bankruptcy since like 2022, because they'll actually have interest payments to make.
That's an accident of becoming a meme stock. That's not a business model.
Revenue continues to decline year over year. Nothing about the business has materially changed the trajectory they have been on throughout all of this. https://www.macrotrends.net/stocks/charts/GME/gamestop/reven...
https://www.macrotrends.net/stocks/charts/GME/gamestop/eps-e...
There's something else going on. The other companies known for being meme stocks are doing substantially worse in terms of share price. AMC is below what it was before early 2021, down 90% from its high. That holds for most of them. Bed, Bath, and Beyond famously went bankrupt.
Meanwhile, yeah, Gamestop is down about 75% from its high. But it's also 2.5x its post-top low, and... um, about 24x its 2020 low. Go ahead and check. Makes at least some sense, when you understand that they stemmed an EPS bleed and turned it into a profitable company.
A sinking company buying a healthy company several times larger and more profitable doesn't make sense. The eBay board and shareholders would be crazy to participate in this fantasy. GME shareholders are already known to be of questionable judgment, so whatever they do is SNAFU. So, it's not surprising GameStop would try something crazy, what's surprising is anyone is taking it seriously.
I don't know what your issue with Gamestop is, but calling it "a sinking company" is wildly inaccurate, bordering on delusion.
What would you call a company with revenue that declines every year for a decade?
GameStop in Canada owns stores in active malls and in standalone locations. Hard to see the store empty, even at 1030am on a weekday in November.
Gamestop in Canada isn't owned by Gamestop in the US. They were also historically unprofitable so people might be in the stores but they aren't buying enough.
Now that you mentioned it, I seem to recall that news. The point stands that in some areas, that type of store can still perform.
Perhaps they would come to an agreement.
There's friction though, if the process is under one roof end-to-end, ebay can take 30-40% (15-20% today) of every transaction by just letting you dump your old stuff. Might even eat FB marketplace and CL.
It's hard to get lower friction (register a new account) and lower fee (0%) than Craigslist.
People trying to sell their used junk aren't going to accept a 30-40% cut. It's why they aren't using eBay these days in the first place.
Not exactly, the biggest annoyance with eBay (in my experience) is dealing with shipping, disputes and returns. If I could recover even 50% of the value of unused items without dealing with the ridiculousness of p2p transactions (flakes, tire-kickers, scammers) I'd do it in a heartbeat.
Don't pawn shops already solve this problem? Make your way there, dump your stuff, get peanuts for it in exchange (but might still be worth it if you truly don't need said stuff).
When your bright new business-saving idea is to be a pawn shop I might wonder is this the most efficient place for me to keep my capital in
Exactly this
I regularly accept a 40% cut or more at “Hard Off” (a chain store that buys and sells used electronics in Japan). Why? Because I don’t want to deal with the hassle and risk of selling the items myself.
I’m able to bring in a box of items that I don’t use and are taking up space, and they pay me cash on the spot. It’s very convenient.
I think eBay buyers would also have more confidence buying from eBay/Gamestop than direct from other users.
Checkout the insane amount of money Goodwill makes because of people getting rid of their "junk". There are 151 independent Goodwill organizations and all of them have a CEO, usually making 6 figures a year.
https://paddockpost.com/2025/02/14/executive-compensation-at...
If people are giving stuff to Goodwill with no compensation, I'd say they definitely would give eBay stuff for a 30-40% cut.
"Goodwill Industries was established in 1902 and is widely known across the country as the place where we all donate clothing and household goods to help others."
That's the first sentence from your link. Clearly people don't treat this org, literally called "good will", the same as they treat freakin eBay.
I don't think this is true, because people are often willing to spend a bit of extra time to do something good, like make a donation, but wouldn't be willing to take that same time to make $10.
I would. I don't sell on eBay because it's a hassle to manage all the rest of it. So I end up taking it to a place like Half-Price Books instead and get hardly anything, but at least it gets out of the house. 30-40% cut would be a significant step up compared to what I get from those places.
Speak for yourself. There's a reason places like Once Upon a Child and their parent stores exist. There's even other entirely digital stores on the sell for pennies instead of donating market.
People are broke. Just not everyone.
People regularly give businesses >50% cut to get cash immediately and this isn't even counting resellers who low ball people who don't know what they have.
I thought the point of eBay was to get rid of that middleman. Wouldn’t that be something eBay would have done at some point if they wanted to own a pawnshop? Not saying that cannot work but that doesn’t sound like a genius idea
Over time, eBay has become the middleman - with international shipping centres, basically escrow service with buyer protection, and rather high fees for promotion and of course, the actual sale. No middleman is something like Craigslist or FB Marketplace.
I interviewed at a place that had their own collectible card market, I think they partnered with eBay. But the whole service was that you would yield your valuable cards over to them and they would store them in a repurposed bank vault for safe keeping or to act as a seller. Cards that were like $1k or more.
They seemed to be doing really well esp with all the pokemon and MTG card crazes going on.
This is part of the value prop of TCGPlayer, which was bought by eBay. They're specifically a marketplace for trading cards. Like Amazon, sellers can keep their product and sell it through the site, they can ship their inventory to TCGPlayer to manage logistics, and TCGPlayer sells cards on their own.
eBay has also started doing strongarm middleman things as well.
If you list an item, it strongly "suggests" a price. Sounds innocuous, right? However, when every seller knows they would be stupid to list a product for less than the suggested price, that means that eBay is enacting a collusion process on their sellers to regulate prices for products sold on their platform.
I don't think this is illegal in any way, but it is bad for the buyers as it decreases the chance that they will get lucky with a purchase and ensures that all purchasers on the platform spend as much as they can afford to spend.
Next, as a seller, eBay presents you with an option to "promote" your product, for a fairly significant percentage of eBay's suggested sell price. (Last time I tried to sell something, they wanted $9.99 to promote an item expected to sell for ~$150, for instance). If you do not "promote" your item, then it is thrown to the bottom of the listing and may be filtered out when purchasers sort by "price low to high" as they often do.
I chose not to promote my item as I was just getting rid of it, (brand new OEM toner for a printer that normally sells for $200) and it got almost no views and ended up selling for $40, of which ebay took $7.50 for their cut.
I checked the other solds for the same product and mine was the lowest sold by almost $100 all seemingly because I didn't pay the racketeer price upfront.
I didn't care about the money, I was just getting rid of it, and ebay punished me for not playing ball their way while also losing out on their profits just to make a point with me.
If you don't eBay the ebay way you will suffer for it.
Speaking of which, eBay has started changing the number of results based on your search filtering, preventing purchasers from finding the specific thing they are looking for in exchange for something that is often more expensive and not quite right.
Try it yourself. Search for something very specific and then change your filters and see the number of available items increases and decreases based on how you search. I honestly would not be surprised if they were hiding the unpromoted less expensive more accurate item you are searching for from you in the expectation of inducing you to buy the more expensive item in the process.
Why would eBay do this? They make more money. It's pure enshittification. They charge the sellers to promote. They set the prices. They charge an insane percentage, something like 15-20% of the final sell price to the sellers, and they have made the platform hostile to its original purpose of being a bazaar for ordinary people to sell their old stuff to people that might want them.
Of course, they are still seller hostile, they protect fraudsters who buy expensive items and claim they are fakes or broken and return bricks, and they have strongarmed their customers into arbitration agreements in an attempt to prevent anyone from suing them to stop their anti-consumer practices.
Yeah, I got fucked over by eBay and will never sell on there again.
eBay let someone scam me out of $700.
I sold a Mavic 2 Pro drone with 5 batteries. The whole process was a mess. Scammer initially complained that it didn't come with a CrystalSky tablet that was in one picture (that was only added AFTER after he had bid already and asked to see Flight Logs, and was explicitly disclaimed as not being a part of the package, nor was it in the receipts I sent the buyer). After pointing out those details, silence.
Then, three weeks later:
"The batteries don't work. I want a refund."
"Batteries? Any of them? All of them?"
"All of them, none work. I want a refund."
Note that two of the batteries were less than 4 months old, still in warranty.
He then stated he wanted a refund of $800. For five brand-new batteries, that would only be $670.
No evidence was shown, despite multiple requests (like a video of a battery on a charger, or on the drone, failing to power up). I stated I'd like to get the original batteries back, as at least I'd be able to get them replaced under warranty or possibly repaired and recoup some of my money (I was skeptical there was -any- issue, but still, good faith). He "happily" agreed. I asked him to send me a message on eBay (so it was tracked and not avoiding their system) acknowledging that offering a partial refund was contingent on his sending me the batteries back and that he accepts me disputing the refund if not.
He sends a message indicating all of the above.
Refund is sent (for about $700, to include his return shipping costs).
Thirty-five minutes later, I get a message, "USPS says they don't ship damaged batteries, so I will not be returning them". (35 minutes? So what, you were just sitting around waiting for the refund, and then the very moment I sent the money, you jumped in your car, got to the post office, had this discussion, got home, and were able to send me this message? When your home address shows you about 15 minutes from the nearest post office?)
I then suggest we meet in person to exchange them (I live a few hours away, not convenient, but still, $700...). He umms and ahhs, "How will I be able to prove that I gave them to you in person?". I suggest we do it in a police station and point out that his local PD even welcomes people to use their lobby for CL, etc. on their website. More umms and ahhs. "I need to contact eBay support to see if they allow this." I point him to eBay's specific FAQ page describing exactly this and how they recommend doing in person sales, and refunds, documentation thereof, and how they support it. But he ignores that and says, "I never heard back from eBay support, so I'm not sure what to do". I point this page out again, and he goes silent.
I opened a dispute. No evidence was provided for damage or faulty goods, referenced the multiple requests for video, or of anything.) Multiple instances of the buyer trying to show something was problematic with the listing, not abiding by the agreement and refusing/avoiding any method of returning damaged items.
Overnight, no further inquiries.
"We have closed your dispute. Based on our review, the buyer is entitled to keep the partial refund for damage. He is also not required to return the damaged items".
So he ended up with a Mavic 2 Pro, with less than 20 hours flight time, 5 batteries, for in the order of $950, all told.
Should have filed a police report. eBay will side with you and refund you. Had similar happen a few times and every time just required filling out a form in whatever city the item was sent to and attaching it to the dispute.
Yeah, $700 is worth a lawsuit. eBay knows who the buyer is and would be required to turn over the transcripts of the conversations to the court, and if you're suing the buyer eBay's arbitration system wouldn't protect them.
Then, after you win that, you can drag eBay into arbitration for the suffering. I bet you'd walk away with $5k or so after expenses if you have a decent lawyer.
The fee for filing a lawsuit by itself is $405. That's before any lawyer touches anything and you get to find out how high a lawyer's hourly rate is.
A simple, easy lawsuit will cost you in the same range as a house. Even if you win, thanks to the American rule of "each side pays their own attorneys' fees."
No, $700 is not worth a lawsuit.
Do you not have small claims court? They're usually free.
anecdotally; this is why I now use fb marketplace exclusively to sell stuff. cash only. meet in person; feel free to test / inspect stuff. All sales are final and are as-is.
Yep and hate even that. Someone can make the next unicorn to fix this pain.
Had similar issues. eBay being a mediator for your money but not the actual items is maybe inherently a dysfunctional system. They don't make any representations as to the accuracy of a listing, but will happily pass judgment on whether to refund or not based on... the aacuracy of a listing.
Maybe not every sale needs a middleman, but in a lot of cases, seems like there would be a benefit to it.
Yea, buy on ebay either. It's all a scam now.
I think the difference is that GameStop already has this network of pawn shops, and those stores are doing enough business to justify their existence (at least somewhat; GameStop wasn't doing great before all the craziness). I could see something like the UPS kiosk in my local Walmart working; if you offered eBay returns at GameStop stores, you would be adding revenue without needing to justify an entire store to it like eBay would have needed to.
There's also the synergy that GameStop now has access to more used gaming inventory, a category that I'm led to believe is high margin for the stores.
> GameStop already has this network of pawn shops, and those stores are doing enough business to justify their existence
Gamestop closed 2,400 stores from 2020 to present, and operates just 2,200 stores currently. They'll continue to close stores as their revenue continues to shrink (down 60% in the last decade).
>used gaming inventory
physical used game inventory is a fraction of what it was a decade ago, and continues to shrink as a category, digital sales continue to climb and exclude Gamestop
It's reasonable to predict that as physical media is phased out by the likes of Sony, Microsoft, and Nintendo, that the value of offline capable inventory will shift to an investment instead of a liability. Increasing their percent cut as a result.
Their margin was highest on used physical media, which continues to plummet. Physical sales are down from $13b in 2015 to $1.5b in 2025, while total sales of physical + digital went from $23.5b in 2015 to $60b in 2025. Physical media is a tiny fraction of current game sales, even if their margin skyrockets, they're stuck in a tiny kid pool of potential sales.
Not to be harsh on people who like this stuff, but reminds me of whenever people bring up how big vinyl record sales are now. Which is like, yea they're "big" just because it was a tiny market for the last decade and they're profiting mostly on nostalgia. Vinyl's not making some huge comeback, but it will probably sustain some niche resellers for a long time.
Yes, exactly. In fact there were some ebay "helper" companies that made a go of it in the early 2000's. They went out of business because it doesn't add enough value. USPS created Media Mail and flat rate boxes, and UPS stores are found in nearly every community. They handle the hard part (shipping) well enough.
The only thing I can think of is Gamestop positioning to become a clearing house for fan swag or gaming items the way Woot is for Amazon overstock.
There's one of these near me in a shopping center with terminally low rents. I think the additional value add for these places is that a) they can help you price the item to move and b) they can wade through eBay support if things go wrong.
That sounds like a very low value add. So you’ll have some teenagers clicking on the eBay portal for me like I’ve never used a computer before?
I think the value is in not having to mess with scammers and people who make eBay difficult to interact with (i.e. those who game the system).
I remember one of these shops all the way back in the late 2000s. At the time I was confused about whether it was operated by eBay or a third party. It did not last long.
iSOLD It on eBay apparently still has listings out of Pasadena, California
https://www.i-soldit.com/listings/
Memorialized: https://www.youtube.com/watch?v=FNsFEhHLlHA
> USPS created Media Mail
Umm, that’s been around since 1938, which is a few years before the era you’re talking about…
Amazon probably wouldn’t exist if it weren’t for USPS subsidizing media mail
Yes, exactly. In fact there were some ebay "helper" companies that made a go of it in the early 2000's. They went out of business because it doesn't add enough value
It didn't add enough value back then, but IMHO it does now. Selling on eBay is a massive hassle these days for a variety of reasons, and much less profitable for onesy-twosy transactions than it used to be.
If I could just drop off a bunch of stuff at my local GameStop and forget about it until the checks arrive in the mail... yeah, there's definitely a business model there.
They’re called consignment stores and some have an online component (which can involve eBay or other similar marketplaces).
Yes, consignment stores have existed for a long time, but they aren't generally functional interfaces to eBay. If you want your stuff to sit on a shelf for the next few years, a consignment store is OK, I suppose.
When I sell something, I usually want the item gone ASAP in exchange for a modest amount of money.
There’s a ton of eBay sellers doing consignment, usually for friends that just want to sell things but I’ve seen some much larger operations selling pallets worth of goods from stores not large enough to wholesale or liquidate.
Yep, watching the store/usernames of sellers can be instructive (many thrift stores, pawn shops, consignment stores, and others list things on eBay, especially for fixed price).
One of the reasons to refund an order is “already sold in-person”.
It disgusts me how eBay sellers abuse the US Post Office by stealing supplies. It’s one way to guarantee I never buy from someone again.
USPS is the only storefront I can think of that allows you to walk in, grab an unlimited amount of boxes/supplies, and walk out with no questions asked.
They will even deliver boxes to your front door, for free, by simply submitting a form online.
It's so easy, I'm not at all surprised that it's occasionally abused.
FedEx used to send anyone big boxes of free bubble mailers
Then have to waste time to politely educate the sellers…
They wrap up the free priority mail flat rate boxes to obscure markings to send them with a cheaper service. So they know should they’re naughty but might not realize it’s reached the level of a crime, perhaps. Definitely didn’t realize they’d have customers who don’t like stealing from themselves (taxpayers)
It’s a federal crime the the post office periodically investigates. You get offered to pay USPS’s estimate of the amount of postage you stole, or else face a criminal trial.
FedEx and UPS will report priority Mail boxes to USPS as well.
Mergers between public companies are almost entirely negative outcomes for shareholders and positive outcomes for the executive team.
Any possible 'synergy' is wiped out by.
- Having to pay a premium on the public market.
- Organisational complexities/moving slowly.
- Culture clashes and bad vibes between teams.
Ah, so Catherine Keener's "We Sell Your Stuff On eBay" store from The 40-Year-Old Virgin is back, and now it's worth $55B. Always knew she was a visionary.
After I wrote my comment I thought about that haha
> and then they list it on eBay and turn a bit of a profit with a local pickup option available
Sort of wondering why nobody did this already. I know that the better charity shops do this with rare and unusual books/records. The UK equivalent CeX has an online offering through webuy.com, which appears to be a Chinese owned multinational.
This is called consignment and is an industry unto itself, usually for antiques since you need a lot of space. You give them your goods and they sell them. You get a cut if they actually sell.
I'm surprised nobody has really mentioned this in the thread. Does anybody remember the "trade in anything" day GameStop just had? https://www.usatoday.com/story/money/2025/12/08/gamestop-tra...
Obviously they're going to need to liquidate a lot of this stuff. It can be quite lucrative if done right. You're basically getting inventory for free.
Consignment doesn't offer the seller a very good monetary deal, though. They're essentially a junk hauler that might pay you a few bucks. We all have that pile of old computer components that we could probably sell piece by piece for $400 on eBay, $200 on Craigslist/FB Marketplace, $100 at a yard sale, and maybe if you're lucky a consignment place will give you a $40 for it all.
> Consignment doesn't offer the seller a very good monetary deal, though. They're essentially a junk hauler that might pay you a few bucks.
You've just unflatteringly, yet accurately, described GameStop's business model for the past decade.
The only missing bit is the meme-stock side of business where emoji-slinging, HODL'ng bag-holder, retail investors with no actual investment strategy fund the whole operation. The amount of misinformation pumping $GME on social media is staggering.
That isn’t consignment. Consignment means you own the item but they put it up for sale in their space. You split the income if it sells.
I mean $40 if you are lucky or goodwill. You could get more selling it “proper” but the transaction cost of it is super not worth it (for me). When I want something out of my house, I want it out of my fucking house. Listing it on Craigslist means I have to babysit it, handle questions, but worse… the fucking thing is still in my house!. And I was over that, whatever the fuck it was, like… a week ago. Now it’s just sitting there in my life cluttering it up. Better take to the garbage or goodwill. Then it’s gone!
At least with a consignment shop I will hopefully get something out of the deal.
> Obviously they're going to need to liquidate a lot of this stuff.
If you read online employees have talked about how they donated it or threw it all out, presumably there is very little of that stuff left at this point (and probably nothing left of any real value).
Ex: https://www.reddit.com/r/GameStop/comments/1qceolz/what_did_...
Mirror: https://redlib.catsarch.com/r/GameStop/comments/1qceolz/what...
“Donated some of it. Took some home. Gave some to regulars. Did other things that might be frowned upon.”
The picture that comes to mind when i picture a GameStop/Ebay merger is that woman's store in 'The 40 Year Old Virgin'.
EBay also has some very accurate data about market pricing for second hand goods and what categories are at greater risk of being returned, which reduces the risk of holding riskier items.
EDIT: regarding the CEO, you should find the interview where he’s challenged about funding.
The interview is here: https://youtu.be/Bmj2PaxX24E
Instant classic.
Was this not lampooned directly in "40 Year Old Virgin" where a young Jonah Hill tries to buy some disco boots at an ebay store but can't because you have to go through the website.
https://www.youtube.com/watch?v=uGxRg5I7r5s
> Imagine being able to list your eBay items locally without having to have people needing to come to your house, or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
I kind of assumed there were already local businesses that already did this? Seems like a decent side-line for any drop-shippers out there. In any event, moving that activity into a local strip-mall would be super convenient for everyone.
There used to be back during the original eBay boom but I haven't seen any in a while.
Or they screwup eBay and saddle it with tons of debt and raise the selling fees massively
And by “paid off a bit of its debts” you mean paid off its debts entirely, most of which were at 10% junk bond yields.
They later raised new special types of debt instruments tied to crypto much like Micro Focus did that are at 0% interest rates.
The company also went from years of consistent net losses to consecutive years of consistent profits.
They would lose sellers in a heartbeat, myself included. The eBay fees are bad enough as it is, throw in whatever insane amount GameStop would take and it would squeeze everyone out.
eBay isn’t the same individuals selling one off things like it used to be. Sellers are established businesses.
But eBay is just bad company with a bad reputation. Why would they buy it instead something like Etsy or make their own thing? If you would ask me what are the worst companies from the “old guard” I would name eBay and PayPal as prime suspects.
Because Etsy is not a general second-hand marketplace. Its niche is artisans making small batch items. And making your own thing at the scale of ebay is not exactly a small feat.
I’ve def bought some CD keys off Etsy. They’ll list anything.
Sadly that was Etsy 10 years ago but today is a dropshipping front
If by “artisans” you mean “people ordering stuff off Alibaba”.
thinking back to 2021 it really shows we need some reform around brokers being able to land their customers stock to short sellers without any kind of consent. Also same shares should not be shortable multiple times ...
What? Most (all?) platforms let you opt out of this, and you receive payment when your shares are borrowed. And shares are fungible, how would it matter if one share is borrowed by 10 people or by none?
“What? Most (all?) platforms let you opt out of this.” Genuinely didn’t know that appreciate you pointing it out.
“Shares are fungible, how would it matter if one share is borrowed by 10 people or by none?” Lets hedge funds create disproportionate downward pressure
> The original shorting of GameStop back in 2021 gave them a bit of a boost back into the green.
IIRC, the short (borrowing stock, selling high, waiting for a downtrend, then buying low to pay back the borrowed stock buy an agreed date) was accelerating the fall of GameStop's stock price.
Then some Reddit knuckleheads noticed the hedge fund shorting GameStop was over-leveraged. They also found the deadline the hedge fund had to repay those shares to the bank.
The knuckleheads pumped the stock. Technical term: I like the stonk.
The knuckleheads then bought and held GameStop stonks. Institutional investors joined in. The hedge fund was legally obligated to pay any price to buy back the shares necessary to pay back the loan by the deadline. So the longer everyone else held on to the stonk, the more the hedge fund would be forced to pay. Squeezing the hedge fund in this way caused the stonks' price to temporarily skyrocket. Technical terms: hodl and rocket emoji
The original Reddit knuckleheads eventually stopped hodl'ing and sold high.
IIRC the hedge fund eventually went under.
Unfortunately, like all things, the knuckliest of Reddit heads would keep hodl'ing all the way back to the ground[1], hoping to cargo cult another squeeze by building wooden towers and dirt tarmacs to entice the sky rockets back. I'm not a stonk hodl'er, but I'd guess they are predominantly the ones who provided capital for Gamestop to buy Ebay. It's probably the most expensive and baroque way to fund a new consignment shop in your home town.
1: is there an emoji for a rocket crashing toward the ground? If not, there should be.
Eh. The capital was provided by various share offerings and, most recently, a bond sale, which retail probably and definitely did not buy, respectively.
But here's the fun part. All of those issuances were made during periods of weirdly high prices. The biggest one was this time 2 years ago. The price jumped to $80. Doesn't seem like much, but there was a share split in 2022, 4:1. Between that and the offerings, buying the same proportion of Gamestop The Company as one share did in late January 2021 would have cost about... $350? The intraday high from 2021? Weird. Oh, but it happened in after-hours. When non-institutional traders usually aren't active...
I don't think anyone truly knows exactly what's going on with Gamestop's stock price.
There is too much overlap with the tropes found in communities who want to believe in aliens and interdimensional beings to take the Gamestop saga seriously. So many appeals to emotion and ignorance, and the investment in a particular outcome has made the reddit groups around this topic indistinguishable from people who are ride or die Trumpers impervious to the falsification of their bad ideas. There is no longer a rubric of reasonable evaluation of new relevant information. The festering wound of people like Ken Griffin effortlessly getting away with their crimes has gone on for so long that has radicalized people to interpret every new piece of info through the lens of being the first crumplings of an eventual avalanche of retribution that has been promised to them.
> I could see this working out decently, assuming the CEO of GameStop doesn't mess it up completely.
So far he's failed to improve Gamestop's core business, which is still in decline, even with the memestock cash gusher.
No one goes into Gamestop anymore, and they won't start because of eBay.
Just bought a used switch there yesterday, 2 guys are selling or trading some kind of game card, kid and his dad getting a PS4... Like you say, no one goes to game stop anymore, it's too crowded ;)
>Like you say, no one goes to game stop anymore, it's too crowded
Must be why it's revenue is declining to it's historic 2006 level, because it's just too busy.
net sales 2016 $8.6b, 2025 $3.5b and still in decline
eBay isn’t doing much better. Revenue Peaked in 2014. Basically treading water. Last real growth was late 2000s.
The part you’re almost touching on but not directly mentioning is the trading card and collectible marketplace.
GameStop would probably be gone by now despite the meme stock if it wasn’t for trading card games and other similar collectibles, and eBay is very involved in that market.
It creates the "Ebay Store" from the 40-year-old virgin makes sense if you look at it that way.
eBay is dying, new competitors are being created constantly, and the big ones like Poshmark are getting more North American buyers and sellers. eBay has barely grown since their post covid slump
Maybe eBay survives as an international site but even at that point, with $20B in debt this will just follow the regular PE playbook of shutting down after many layoffs and pivots
The entire concept of, "I have $1,000 in the bank, im going to buy a $10,000 company, but the debt will be on the companies name, not mine" needs to pass. Can you imagine if the mortgage was owned by our home, not ourselves. And we could stop paying it without any personal consequences
If you want to buy a $50B company, you should pay $50B (loans are fine, but not putting the new company in debt)
> Maybe eBay survives as an international site
I don't really know what alternative there is to eBay as an 'everything shop'. I can get specific screws there, or diff fluid, or a customised motorhome name sticker, or an old baseball cap for an airshow I attended in 2008.
And if I bought the wrong diff fluid I can sell it.
The main value over Amazon, though, is that the search works.
> The main value over Amazon, though, is that the search works.
Super true. You can actually search for the exact brand you want and not get a search result page full of brands XIAOLE, LLKAPOO, JEMROK, QPPNSS, VRINHH.
Also, I don't really know why, but I have much greater confidence on eBay that I'm not going to get something counterfeit or unsafe.
EBay does do search well. Exact phrase matches, negation, ORs
A search for this works exactly as you expect:
(Lamborghini Urus, Audi RS Q8, and Volkswagen Touareg) “stereo wiring harness” -untested
It’s gotten a bit more fuzzy if you do something wrong. I used to have an alert for a mis-spelled brand name to snipe stuff :)
> I have much greater confidence on eBay that I'm not going to get something counterfeit or unsafe.
On eBay, sellers control their inventory, listings, customer service, and resulting reputation end-to-end. On Amazon, the incentives are backwards.
Facebook marketplace is an everything shop, though a bit more local in nature. Also, it's much easier for small businesses that ship to have an online store thanks to Shopify, etc.
The last few times I've used EBay is to get parts for old garden tractors, and even for that I've found cheaper options with small retailers that specialize in that stuff. Most ebay shipping pushes the cost up too much, and with the small retailers usually I can get a bunch of things I need at the same shipping price.
FB Marketplace is full of scammers too. Every time we've tried to sell something, we've had people try to steal our phone number and register it with their Google Voice account.
Interesting you think that because my main experience is the search is horribly broken and they do nothing globally to fix it. Most of it saved searches are full of exclusions because a positive search includes so many irrelevant items. And they don’t enforce categorization so listers constantly put in better categories for their items, when they aren’t just lying with things like “calculator not HP”.
At this point, online fraud control is getting absurd, and AI is just making it untenable. I simply won't use ebay for anything above $50 anymore.
Having physical locations that you have to come to pick up your Thneed protects both buyer and seller. Buyer can verify that what was described is delivered and seller can verify actual pickup with ID.
If they apply a bit of logistics for shipping between stores, Gamestop could crush it.
Fraud is forcing the pendulum to swing from everything-online back to everything-in-person.
> Can you imagine if the mortgage was owned by our home, not ourselves. And we could stop paying it without any personal consequences
To a large degree you can just stop paying your mortgage.
The biggest personal consequence is you will be evicted and lose both your place to live and any equity you built up.
The other main consequence is it will show up on your credit report for 7 years. Maybe some specific forms ask "have you ever been foreclosed on" in the future.
This depends entirely on your local laws and the kinds of loans banks offer.
In most places, you can only get recourse mortgages. You will be liable for the rest of the mortgage, if the value of the house drops so much that selling it doesn't cover the remaining debt.
House values dropping a lot is something that happens fairly rarely, but it tends to happen exactly during the times when you are most likely to be unable to pay your mortgage (recessions, industry downturns, etc.)
As a side effect of bailing out banks they have a lower risk profile than entities that don’t get bailouts. It’s essentially an additional subsidy on top of the already generous ‘money creation’ they’re allowed to do. It’s impossible to compete against this. The riskier the bets the stronger the subsidy so of course they’ll crank risk up to 11. Since the fate of banks and pensions are tied you can’t punish the banks without also punishing pensioners and pensioners are a strong voting block. It’s a distorted economic system that can only either crash or become more distorted. Since becoming more distorted enriches the already wealthy then that’s the only option that will be taken. The only thing that can stop it is to run out of resources to spend trying to save it. Importing a large number of foreigners is a rather creative (desperate) solution. I don’t know how long this will last but I’m confident I will see a major economic calamity in my lifetime.
I mean I don't love eBay, but it's certainly not dying, where did you get that idea? Its revenue has continued to grow every year post-COVID, and competitors all face the central challenge of eBay's network effect.
It's not experience massive growth but that's because it's a pretty mature market by this point. People who want to sell their stuff already use eBay. It works. It's mature.
Revenue peaked in 2014. Pretty much flat for the past 15 years.
Markets are built on eBay and then leave.
Kinda weird for an online shopping site to… miss the absolutely massive growth in platforms that let 3rd parties sell their stuff online.
Others grew out of their niche, best eBay can do is acquire a handful of their new competitors to keep up.
Leveraged buyouts are a fucking disease
Once you own the company you take out loans to pay a onetime dividend to you to pay off your purchase loans. Same thing perfectly legal
Who is going to lend you money to pay a one time dividend? (without putting up quality collateral such as real estate, which Gamestop does not have)
Who should take out the loan if not the new company? The old company? What would be the difference?
> or better yet, getting a cut of what you wanted up front since they're basically a pawn shop, and then they list it on eBay and turn a bit of a profit with a local pickup option available.
More than 10 years ago eBay tried to launch a program where they would buy your stuff and then list it themselves, but it didn't work out.
GME moon and all that in 2021 was financial engineering and mass media coordinated BS btw. they were all reporting it in same week with never seen details, with creating BS narratives. but you all consume and believe the details of it? good work by the engineers, nothing more.
Same for FAANG BS, ZIRP BS writing made by millions of bots online. Even before llms
People want to believe a 'cool' story, not that they got duped.
I think this is the opinion of someone who thinks about personal security (like many on this site) and would prefer not to use Facebook marketplace. From observing many of those around me, this is an uncommon concern. Facebook marketplace is insanely dominant, and nobody cares about inviting people to their house. They would rather invite someone to their house than have to drive to GameStop and drop off their stuff in exchange for losing money on gas, losing time, and losing a cut of the sale price.
I've never used it myself but I've helped out a family members with Marketplace sales before - go and be their nominal "back-up" when they meet the buyer in a local car-park.
>assuming the CEO of GameStop doesn't mess it up completely.
This guy? https://x.com/i/status/2051303211668021478
Surely, he's a safe bet, no chance he will mess up this deal!
/s
I watched that interview live this AM and was so confused. The CEO looked annoyed and pissed the entire interview. Kept answering questions with “it’s on our website [awkward silence]”
It almost seemed like he was incredibly hung over and didn’t sleep last night.
But I got the feeling he was being a jerk on purpose. Still don’t understand why though.
The only guess I have, other than him being drunk, hungover, or high, is that he didn't want to admit or talk about GME dilution to fund the deal.
But then why do the interview at all? Bizarre.
Important background: https://investor.gamestop.com/news-releases/news-details/202...
CEO gets paid "only if GameStop achieves a market capitalization of $20 billion." Buying a $55bn company would certainly achieve that quickly. I'm not sure how they'd manage that (buy with what? Memes?), other than the should-be-illegal process of putting debt on the acquired company's balance sheet.
>>> 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 read that book, and my recommendation is to skip the third act, which is painfully repetitive.
In fact, coming from a finance background, I didn't find the book in general to be particularly insightful, and much more ragebait / policy oriented (which makes sense given the author was a DOJ Antitrust prosecutor)
Is there an alternative you might suggest?
Barbarians at the Gate is the classic LBO book. It gives a nice mix of story and financial mechanics.
> coming from a finance background, I didn't find the book in general to be particularly insightful
Because you already knew that stuff, or because it's wrong?
This book got a unfortunate title. Private Equity can be a completely legitimate activity. What it needs is some regulation on some underhanded financial tatics it uses, such as LBO.
Hilton is a good example, right?
But vast majority of the time it’s bad?
The vast majority of the time, you don't hear about it at all. Leveraged buyouts and the monopolistic strategies like buying out all the private doctors or veterinarians in a region get all the negative press but they're a tiny fraction of private equity.
The big money is in really boring industries like mining/oil/resource extraction, power plants, infrastructure, construction, and other industries that are predictable and in high demand everywhere. PE firms often get the best deals because they thrive on those kinds of connections and can offer up large amounts of capital on favorable terms in exchange for first dibs. The "rich get richer" is their primary strategy and it works without minmaxing exploitation because that's a bottom feeder strategy, not one that can guarantee steady returns on tens of billions of dollars.
I was curious about this, so I searched for the most authoritative study on private equity. Here’s what I got: https://journals.aom.org/doi/10.5465/AMBPP.2021.14309abstrac...
This says that private equity effect on employment is neutral and efficiency is positive.
So what gives?
> So what gives?
People just want someone to blame.
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.
It's absolutely an LBO. The leverage is maximizing debt to equity. That debt is then transferred to the new entity.
It's how they destroy companies while making billions in private profit. They over leverage them. Accrue debts. Sell of equity. Wash, rinse, repeat until bankrupt.
Is it still "private equity" if a public company takes a loan to buy another public company?
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.
It may not be bad for the buyers, lenders, or the previous owners who all profit. But even then it could still be bad for regular people/society at large if it incentivizes anti-consumer practices by financial necessity when an otherwise healthy business suddenly has billions of dollars of debt it has to pay off ASAP. In which case it sort of looks like a simple transfer of wealth from existing customers to the organizers of the leveraged buyout with no broader societal value provided like new jobs created, R&D, etc.
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.
OP is just saying that PE uses the same playbook, not that this move is "private equity".
I mean, it is functionally the same as home loans? Would you be proposing a carve out that buying a house or car is ok this way, but nothing else?
Say you take out a mortgage, then rent the house to a series of meth dealers to extract the rent while devaluing the property, and then default: you're still personally on the hook for any post-foreclosure deficiency judgment. One issue with LBOs is that, after extracting cash and fees, PE funds have various ways to extinguish liabilities that individuals don't, 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.
There are various proposals to deal with this, but the most effective are probably imposing joint and several liability on certain kinds of litigation (breaking the "investor veil" and allowing rights of action against PE funds for the actions of their portcos) and limiting business judgment rule protection for directors and senior managers who approve LBO sales that are reasonably foreseeable to end in bankruptcy, which creates personal liability for fiduciaries. In other words, align the financial and personal interests of the individuals and companies involved with those of the acquired entity.
>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 declaring bankruptcy. I think banks can be considered sophisticated enough that if they got hosed on a LBO deal, that it's hard to feel sympathy for them.
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.
Why would the lenders make a loan where they lose money?
I mean, if I'm allowed to just make up silly hypotheticals, I can easily justify anything.
Say I raise money for a friend to buy a house and they proceed to rent it out to meth dealers. The friend is the one on the hook for the loans, of course; but would I not be on the hook for at least a reputation hit such that I can't do that again? Or do we think folks can get away with that sort of poor judgement forever?
In that sort of hypothetical the Mortgage bank is likely to take one look at your friend, see you with all the money for the down payment, and decide that you need to at least cosign the loan (if not be solely responsible). You would be on the hook for the reputation (and credit score) hit and certainly still paying off the rest of the loan or face foreclosure and possibly a criminal lawsuit for fraud.
Which yeah, leaves a lot of questions for why this is legal for an LBO. Where's the "credit score" hit on these PE firms doing LBOs? How is it that these investors are allowed to be their own mortgage bank, not require themselves to cosign the very loan they are providing the down payment equity for, and not be liable for damages such as bankruptcy of the entity they put on the hook for the loan?
Exactly, that is pretty much what I was aiming towards.
If you give the friend the money as a gift, you have nothing to do with it, right? if you give it to him as a loan to inflate his assets and don't disclose that then you are committing a Federal crime.
I didn't give any money in that hypothetical. Rather, I convinced a lot of other people to give them the loan. That is, largely, exactly what fundraising is. You convince other people to give money to someone or something.
If people are regularly doing this at my request, and it is constantly going to someone that just burns the money, how are people still taking my requests?
That's soliciting, which is regulated at least for soliciting non-accredited investors.
Yes. That doesn't change my question, here. You can arrange to bootstrap another company. It could go bust in a way that you are not on the hook for any money, but you should be on the hook for the things you did. That is the entirety of my point.
The hypotheticals being pushed on this thread have a foregone conclusion that the arranging party is completely free of any hit.
The hypotheticals seem to be in line with reality though. This business model works because the people who make money are the ones who are in control of whether to do it. Liquidating a large company in bankruptcy can get a lot of the money back for the investors while leaving a smoking ruin where it used to be generating economic value.
Are they, though? There are certainly some cases where it has happened, but I don't think it has been established that that is the norm.
Naive searching on the term shows that they common in PE, and they do have a worse default rate at 20% over 2% otherwise. Certainly something to look at more closely. And I would be nervous being party to one. That said, 80% success is still better than what some companies are looking at otherwise.
It is a thorny question. The best way I can square the difference is that generally buying a house with debt is on the debtor and the house itself is collateral. The debtor can't pay back the loan the house is taken by the bank to be sold. Where as a PE leveraged by out the debtor is the target company. A company is different than real estate in that they are a legal entity that is now responsible to pay back a loan equal to their own value. The collateral is the business, but the business is now illiquid and has to sell of real assets and go bankrupt.
For example, Joanne's Fabrics was a profitable business with a fair amount of real estate. After PE bought them and was saddled with unreasonable debt they were in the red and had to sell all their stores. This removed useful and profitable business from the economy and sold off the assets in a fire sale. Where as me losing a house just means a bank now owns it and someone else can buy it. But if someone were to buy Joanne's they'd have to pay off the debt Joanne's owed for being bought and run into the ground
There is a long practice of having cosigners on home loans. This feels basically like that.
Which, granted, if you don't like the idea of establishing a company to take on loan responsibilities, I am not trying to offer a defense of that. Was a legit question of how you would structure it so that this is illegal, but home/auto loans are not.
A cosigner is different than what's happening in leveraged buy outs. A Cosigner is financially responsible if the debtor cannot pay back their portion of the loan. In a Leveraged buyout the purchaser does not take on financial liability for the debt, that is all placed on the company being purchased. This means that if the purchaser isn't even the cosigner in this scenario; the company being purchased is the sole entity responsible for repayment. So if GameStop goes through with this, but Ebay can't repay the debt than Ebay would suffer graver consequences than GameStop
But the biggest reason the purchaser does not have to cosign that loan is because in an LBO the purchaser is also essentially the mortgage bank for that loan. Should that be allowed?
Fair, but the nefarious scenarios people are talking about should at least be a major reputational hit for the people that did the fund raising. We are literally describing a ton of value getting destroyed. Someone is taking that hit.
It would be functionally the same as what you described if the parent company took on the debt, but that’s not how they do it. They make the purchased entity take on the debt. Hence why you often see mass layoffs in the company that was acquired soon after the deed was done. The company has so much debt it can barely function and the easiest way to pay some back is redirecting salaries at it.
Then once you realize why private equity firms do this, how their leaders have extreme monetary incentives to squeeze value out of companies in ways not limited to this, you realize why it’s insane how we have basically zero regulation on it.
Home owns are owned by people, not the home itself. If someone fails to pay a loan, their own credit score will be impacted
For these PE loans, its the new company that takes on the debt, not the buyer. Essentially any broke person can "afford" any trillion dollar company this way
Home loans are secured by the asset (the home). It's comparable to stock, but it's a less liquid asset.
Any broke person can afford a trillion dollar loan, if they can convince the bank that their house is worth 1.8 trillion dollars. But is that really possible?
Loan companies do due diligence so if GameStop is $A and eBay is worth $A + $B, then so long as $A/$B remains the same, the acquiring company owns two assets worth the full price of the loan.
It doesn't seem to be a scam to me. Am I missing something?
The difference is that when you buy a home the debt is in your name and you are required to pay it off. In a leveraged buy out wouldn't be to person taking out the loan, the debt is owned by the target of the purchase. If it were like a home loan and this deal goes south GameStop would go bankrupt and have to sell it's own assets to cover the losses. But in reality the debt from the deal would be owned by Ebay and if GameStop can't pay the loan back it'd force Ebay into bankruptcy and sell Ebay's assets. It's essentially a riskless move by GameStop and PE in general. Heads GameStop wins tails Ebay loses
There are other categories of real estate loans where the debt is against the property itself. The lender evaluates the property's income and expenses when underwriting the loan.
That sounds like buying a business that owns real estate as an asset.
Fair point, it's a corporation taking out the loan so there's nobody to go after if the company goes under the way there is if the value of your house tanks and you stop paying your mortgage. But doesn't the bank take that risk into account when deciding whether to issue the loan? Why should that be illegal?
The way I’m reading your question, it seems like you are looking for the law to follow philosophically consistent principles.
That is simply not the case and lawmakers can make any kind of law to shape the society how we wish. If leveraged buyouts are creating problems for the country, then it’s totally valid to make them illegal in certain cases.
The question I'm asking is: what problem? If a bank takes a risk and that risk doesn't pay off how exactly is that society's problem?
And yes, I do think laws should be based on consistent principles. I'm surprised you consider that a controversial point...
The problem is that people can take loans without financial liability (not how home purchases work) and drive profitable businesses (which are good for the economy) into the ground (bad for the economy and society).
No one is worried about the bank making the loan in this situation. They are concerned that PE is buying up large parts of the economy using debt they aren't responsible for, which makes them irresponsible owners because they do not face consequences when the moves fail
> which makes them irresponsible owners because they do not face consequences when the moves fail
Again, isn't that entirely the bank's problem? They're responsible for the debt if the company can't pay it, right? I agree on the surface this seems like a bad deal for the bank, but what makes you think you know better than the bank so much so that they shouldn't even be allowed to take that risk?
>I do think laws should be based on consistent principles.
https://repository.law.wisc.edu/s/uwlaw/item/27617
Leaving aside that the new company is the buyer; the point remains that home and car loans are leveraged loans. With the main asset in the leverage being that which is being bought. Defaulting on that loan results in the assets going to the lender.
If a lender builds a pattern of lending to people that can't make the payments, that lender will take a hit. If we think that isn't happening, why? And how could we return us to that?
Or, back to my question, how would you structure a legal framework where some loans can be done this way, but others could not? (I can think of a few ways, largely curious if I have a blind spot here.)
In a home loan, the borrower buys a house and pledges that house as collateral. The debt is the buyer’s obligation. The house does not have to “pay the mortgage” by laying off the kitchen, selling the roof, or cutting maintenance. The borrower uses outside income to service the debt.
In an LBO, a private equity buyer often buys a company using a large amount of debt, but the debt is typically placed on the acquired company’s balance sheet or serviced from that company’s cash flows. In effect, the target company helps pay for its own acquisition. That is the key difference.
In a lot of LBO schemas, the acquirer loads the target with, abusing leverage to maximize its returns, but this leaves the company with very little margin errors, any hiccup in the economy, and Kabum! The company goes under, an once viable company closes its doors, employees lose their jobs and local economies suffer. Meanwhile, the PE entity walks with as much cash as it could extract from the acquired company and debt-free.
Some PEs also go one step ahead, make the acquired company borrow more money, not to invest in the business, or restructure debt, but to pay a dividend to them.
In other cases, PE companies acquire a controlling block and then use it to make the company sell their assets to them, to be immediatelly leased back to the company. Then, there is also the practice of extracting all kins of "monitoring fees", "advisory fees", "consulting fees", etc. for services that are vague and frequently of questionable value.
PE companies also frequently engage in overly agressive cost-cutting to manipulate the EBITDA in the short run to sell the company at a appreaciated valuation, but hurting the long term value creation potential of the company and the quality of their services.
For PE, sometimes even bankruptcy is a business strategy.
Something that I never quite understood is who lend the money for this sort of activities?
The lender knows how risky they are.
Technically the lender is the purchaser in the LBO which is also why this is so much the purchased company having to pay for its own purchase. Which seems to me like the easiest part to regulate: require third party lenders who can also audit the details of the loan terms and fees.
On the bright side, if the plebs start making money through LBOs, they might finally find the will to regulate.
Taking a $20b loan from TD Bank + sitting on $9b CASH + GameStop stock for the rest. They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment. Smart if they can make it work.
Update: Numbers still don’t add to $55b - I think there’s a $14b shortfall. Not sure about how they are planning to fund that.
> They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment.
Is that really an advantage? Fulfilment is always handled by a lot of places for the big e-retailers for returns, which is similar to what eBay needs for sellers.
How much does Staples charge for its Amazon return fulfillment where you don't even need to wrap up the item?
It is really popular: https://www.staples.ca/a/learn/amazon-returns-now-available-...
I question whether it is advantageous to use GameStop stores for this or just to piggy back on what Staples is already offering to Amazon and others for their returns? Fulfilling returns for Amazon isn't significantly different to shipping eBay orders.
My kneejerk is that most consumers these days expect delivery for items purchased online, and allowing them to pick up their items at a brick and mortar probably isn't the issue.
Now, dropping off items you're selling? That probably removes a decent hurdle for many first-time/one-time users who aren't familiar with shipping (what box/label/insurance/padding/...).
> My kneejerk is that most consumers these days expect delivery for items purchased online
100%.
> Now, dropping off items you're selling?
This is what Staples is offering to Amazon but for returns - quite similar. And they could offer them to eBay as well I am sure. You do not need your own chain of brick and mortar stores to do this and I am sure the cost per drop off would be cheaper with Staples than your own chain that only serves you.
GameStop is a game of constant pivots that sound good to its meme-believers that do not really work in the real-world.
> This is what Staples is offering to Amazon but for returns
Yes, and usps stores and Whole Foods do that for Amazon in the US as well. The difference is that each of those items don’t need to be individually packaged and shipped to unique locations. My local USPS put all the returns for the day in a giant bin and an Amazon driver picks them up.
I think the cost of labor and liability involved in having a local retail worker wrap, label, and ship every package would be an order of magnitude higher than shipping alone and destroy any value in offering it.
Sorry, are you saying that USPS cannot handle shipping across the country cost effectively? But somehow GameStop can, which has never done point-to-point shipping before?
Kohl's also has a returns arrangement with Amazon.
> Now, dropping off items you're selling?
A place that you could take items and have them packed and shipped for you would remove an enormous hurdle for new eBay sellers. It's easily the most annoying part of the entire process.
Hell, maybe they could even list items for people? Like a massive digital pawn shop.
I could see this really working out for them if they do it right.
Actual pawn shops already do this, though.
Yeah, but now with a brand
Can confirm. The main reason why I don't sell stuff on eBay more is because of the high shipping costs and frequent scams.
Facebook Markerplace has issues of its own, but if you agree to meet up at a safe public location to buy/sell the item in person, then it mostly alleviates those two issues aside from the small chance of receiving counterfeit bills.
If Gamestop and eBay merge, then they could (potentially) offer a better deal to buyers/sellers by either buying certain items directly, shipping them at lower costs, or having an employee "verify" the item before it ships so that the seller receives better protections.
That's assuming that this is truly an ambitious merger rather than just being some kind of exit liquidity scam that gives Ryan Cohen a golden parachute right before he peaces out.
>Is that really an advantage? Fulfilment is always handled by a lot of places for the big e-retailers for returns, which is similar to what eBay needs for sellers.
I think the advantage is going to be "bring your junk to GameStop and an employee will put it up for sale and handle shipping"
You'd get considerably more trust buying something on ebay that at least some teenager looked at and verified was real and powered on, etc.
A company doesn't need $55bn to buy a $55bn company. They can issue new GME shares and exchange $EBAY for $GME. These are sometimes called "stock-for-stock" transactions
Basically a merger.
Except a sudden dilution usually tanks the stock by the exact % its diluting
So GME dilutes by 20%, stock price immediately goes down by 20%. its not some infinite money hack
Except in this case, the company also now owns EBay with a market cap of around $44B before the takeover bid was announced.
I don’t think GP was claiming it was an infinite money hack at all.
Here's the GME CEO attempting to explain the deal https://x.com/i/status/2051303211668021478.
And "Attempting" is doing the heavy lifting here.
"Attempting" is not in any way a valid description of what he's doing there. That was a wild clip.
GameStop has a standing approved agreement to issue up to a billion new shares. If you read the offer you will see it is 50% financed by GameStop stock.
They threw him a hardball today in his cnbc interview on this topic. $GME stock value would plummet short term, but the combined company would revalue much higher.
Current Gamestop shareholders would be diluted. They would own, proportionally, a much small slice of the combined company, but at a higher price point.
The framing of this as, "Ryan Cohen is diluting Gamestop shareholders in order to meet the terms of his enormous pay package" is disingenuous though, as his pay package is all stock. He's diluting himself too. He obviously has faith that, long term, the value of the combined company can substantially grow.
If his choice is between not getting paid due to not meeting targets, and getting paid in diluted stock, then it’s straightforward enough.
He has a massive stake in Gamestop outside of this pay package. The loss from diluting his massive accumulated position is not worth the bonus unless he thinks the price will recover long term.
If he gets awarded a huge number of shares for hitting market cap goals, existing shareholders are diluted to his benefit.
How is the framing wrong?
>He obviously has faith that, long term, the value of the combined company can substantially grow.
Depends how much of them he has before and he will after, it might still be worth diluting if difference is vast.
Also, why long term if short term could also do?
My take? The strategy is like a contractor fixing up houses. GameStop was the crappiest house on the block. He’s fixed it up and is using it as collateral to take out a loan and buy the dilapidated mansion next door (eBay). He’ll keep going until he’s gentrified the whole neighborhood using the value of the current business as collateral to buy the next. He wants to sell only when the value of the entire gentrified neighborhood reflects market rate for the work he's put in.
The only thing that Cohen has done is shut down stores and cut costs massively at the expensive of revenue. He hasn't really fixed anything, he is just managing their demise. All of his strategic initiatives like expansion of e-commerce or an NFT platform were complete disasters that had to be wound down. The only reason the company is even showing a profit is because they repeatedly diluted shareholders to raise cash and then re-invested that money into Treasuries. Basically, if you are buying GME stock, you are getting an expensive fixed income wrapper.
Buying EBAY would be a bad deal for pretty much everyone involved. GME shareholders get diluted to buy EBAY for way too much money. EBAY shareholders get paid in vastly overvalued GME shares. And the entire thing would be managed by some guy whose only strategic idea is to cut costs. The only one who would benefit is Cohen, because it would create a sufficiently liquid market for him to sell his stake, something that is not currently possible in GME.
> The only reason the company is even showing a profit is because they repeatedly diluted shareholders to raise cash and then re-invested that money into Treasuries.
That's simply not true.
Profit excluding the interest from the cash in 2025 was ~110 million. https://www.sec.gov/Archives/edgar/data/1326380/000132638026... page 27.
Yes, closing unprofitable stores reduces revenue. It also improves profit. You're describing... Good business.
You're entitled to your opinions about the products and the merger. We'll have to see how it plays out
You’ve presented a plausible and concise counter argument here. Time will tell.
https://dasams.substack.com/p/the-cohen-endgame?r=af3hc&utm_...
Wouldn’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.
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.
So you mean...marrying someone but transfer all the personal debt to the others, then divorcing so that I have no responsibility whatsoever? Not even an obligation to settle for the debt just like disappeared through an expired relationship?
Is there a legal term for this kind of restructuring of debt?
I vibe asked it on Kagi Assistant and it said the closet relevant result is https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
To me it seems more like leveraged buyouts + debt restructuring all at once. I rather coin this term "debt offloading", which could also cover the cases with Enron for the tactics they used about 25 years ago
As soon as you mention Texas Two-step, you'll get a chorus of people who argue that it's a good thing, that it's really the defendants doing the plaintiffs a favor and making it easier and cheaper to sue them and the fact that each company that has done this has snuck out of between 90 and 99% of its obligations and washed their hands of them is a complete coincidence and that just wait, you'll see, the next time a company does it (using the same law firm that has handled all these) they'll really, truly, cover all of their obligations, perhaps even more, and at less cost and effort to their beleaguered plaintiffs.
Scamming the state through private debt emission.
In personal terms there is the "deathbed divorce", a uniquely American construct where couples, often elderly, get divorced while one is in hospital or hospice in an attempt to not saddle their soon to be widowed partner with six digits of medical debt.
In another uniquely American construct, that won't stop hospitals calling up all their relatives either implying that they are now responsible for those debts, or that it would be a mark of respect and honor if, even not, the relative would be willing to settle them anyway.
"Private Equity"
Welcome to late stage capitalism
This is early 1990s capitalism.
1980s even. It takes a while to siphon off all the value built up by multiple generations.
The hidden truth about economics in my lifetime.
I believe this is what they call the 'Texas Two-Step'
Sure it is not a Kansas City shuffle?
pretty sure you're just making a joke but the specific legislation exploited here is only present in Texas and Delaware iirc. Not a lawyer though
Perplexity wants to buy Google Chrome vibes.
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.
He can argue that. But to me it seems more likely that culture and market demands are so different between the two companies that sharing any substantial resources would be to the detriment of at least one of the two halves. And more likely detrimental to both
The most beneficial thing is how even proposing this shifts peoples' perception of Gamestop from a beloved but struggling brick and mortar chain to a successful business
the only benefit I can see is some kind of eBay pick up and verification scheme where sellers use the gamestop locations to send their products and buyers go theere to pick it up. That would basically create a "this is garbage feedback" that could cleanup some of ebay's long standing problems in trust.
While this seems like the perfect synergy with a company that has too many branches and not enough business, those branches are also tiny. I'd bet employees are not enthusiastic about becoming UPS.
Becoming Radio Shack / Microcenter, as far as 3D Printing and DIY electronics, seems like it intersects with their target audience more, but they're also probably pretty short on space for that.
employees are not enthusiastic about becoming ups
Employee enthusiasm isn’t really much of a factor. For better or worse, in the event of significant change of the brick & mortar day to day operations then employee continuity & institutional knowledge is even less of an actual strategic asset than the minimal treatment it already gets in consideration.
> I'd bet employees are not enthusiastic about becoming UPS.
At the same time, most of the employees at my local UPS store have openly expressed a lack of enthusiasm about becoming Amazon returns employees.
yeah, their shops arnt sized to do much more than UPS style package movement.
I dont see it as a good value, but it's the only thing I see as a synergy. Otherwise it's just more garbage capitalism.
> garbage capitalism.
How is this defined?
A few things come to mind:
- SPAC IPOs that dodge standard disclosure requirements and worsen information asymmetry. See WeWork.
- Board positions filled with CEO loyalists instead of independent directors. See OpenAI firing Altman before Microsoft reinstated him.
- Management taking seemingly arbitrary decisions that turn out to be directly linked to their own compensation. SpaceX ordering a bunch of Teslas, or merging with a distressed asset (xAI). See above point on loyalist boards.
- The very concept of leveraged buyouts where financiers borrow money to buy a company, then put the burden on repayment on the company AND pay themselves hefty management fees. This inevitably leads to layoffs and a rapid decline in product/service quality while the company is scrapped for parts.
Moving money around and pretending that there is more of it.
You mean leverage/borrowing? Pretty time tested mechanism of risk taking in free markets.
Moving money from one pile to another so that you can skim a little off the top is imaginary work and is slowly destroying the west
It's always gone on, and probably always will on some level.
It's only when it becomes the primary concern that capitalism eats itself.
That’s not what’s slowly destroying the west but I understand that I must keep my remarks on this Marxist-friendly website very tame.
Slumlord owners of the network effect monopolies innovating ever lower investment in innovation and upkeep with ever higher increases in rent extraction, with a few nipple tassles slapped on the side to entice retail investor hype cycles.
> to a successful business
Maybe from a brick-and-mortor store to yet another private equity fund whose continued existance comes solely from debt and merger trickery.
>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.
GameStop had revenues of $3bn last year and eBay was $10-12bn, so combined it's $13-15bn. A net income increase of 1.2bn on that gross is a tall order for M&A efficiencies. Especially difficult when the two companies have essentially zero operational crossover, besides business admin. It doesn't seem likely to me that merging eBay's accounting/legal departments into GME's (and similar efficiency gains) is going to save anything close to a billion across the two entities.
I don't think this is a serious assessment. For years, the core business of both companies has been facilitating the flow of used goods. Gamestop has moved strongly into collectibles recently, with a partnership with collectible grading firm PSA and the introduction of (essentially) lucrative trading card lootboxes, whereas eBay has capitalized on the same expansion of the collectibles market with new live/flash auction features.
IIRC, Gamestop recently had a "trade-in anything" day, where they accepted a variety of products for store credit. Seems an awful lot like this was some sort of test for accepting products in-store for eBay listings, or something along those lines. They already accept trading cards to send off to PSA for grading and to place into their lootbox system.
As far as efficiencies go, you can see things like shifting shipping by individual sellers to mass shipping to/from a warehouse, a much heavier footprint in collectibles, and perhaps quality control that reduces buyer disputes (this one's a bit iffy).
Well let's be clear, the "trade-in anything" day was a fancy discount day. They gave everybody $5 for whatever they brought in, online you can read from employees that they just donated or threw it all away, no attempt to actually keep any of it to sell.
That said IMO the biggest difference in the two situations you're describing is that EBay is not in the business of buying the items to then sell later, they just facilitate transactions between two parties and some of the logistics (depending on the seller). They're similar as far as dealing with "used goods" but the actual design of the business and risk being taken on is very different.
EBay also not really lacking what you're describing - there are fufillment centers that can be used for EBay listings, there's the EBay "Authenticity Guarantee" program for cards, they already own TCGplayer which does all of this for trading cards way better than GameStop does, etc.
Perhaps somehow these things could be improved by GameStop but I can't imagine it being significantly better than it currently is.
Can you tell me where your local eBay fulfillment center is? I can tell you where my local Gamestop is (no, not that one, the other one).
No, why does it matter? I also don't know where my local GameStop is since the few by me closed a couple years ago :P
Plenty of stuff on EBay offers me 2 day shipping clearly via fulfillment centers, as far as I'm concerned that's all that matters. Do you think the addition of GameStop stores would mean EBay can offer faster shipping than that on a significant number of items?
You asked what could be improved with Gamestop. Public knowledge of Gamestop locations is a boon if people don't know where your existing fulfillment centers are.
Yes but I don't need to go to my nearest fulfillment center if they ship everything to my house, that's why I don't know where it is.
What do you think people need to visit fulfillment centers to do?
Buyers? Sure. (Unless you're like me and paranoid after getting porch-pirated.)
Sellers...?
Sellers what? You generally don't just drop stuff off at a fulfillment center, when you get to that size you're dealing with large amounts of inventory and you ship it to them.
If you're saying sellers could come into a GameStop to have their individual items packed and shipped out, I suppose, but:
1. They don't really have the space for much shipping volume at any of their stores.
2. You can walk into any USPS, UPS, FedEx, etc. store and do that already, you don't need an 'EBay' store. GameStop would presumably get the packages picked up by one of those carriers so it's not saving any shipping time or expense.
For buyers, in many cases there's already alternative drop-off locations similar to GameStop Ex. For UPS deliveries I can get them shipped to a bunch of different convenience stores near me. GameStop stores might be a nice addition to that list but it's not enabling something you couldn't do before, and I would think for most people they already have a closer location than a GameStop.
Well, look at what you can already do with their trading card program. You could just list cards yourself on eBay, of course. You could drop them off at a shipper to send them off. You could keep them at home while you're waiting for a sale, where I guess they're insured by your renter's/homeowner's insurance. And if you want them graded, you can send them off for that however you like, too.
Or, you can bring your cards into Gamestop, and they'll send them off to get them graded and/or buy them from you, at which point they become inventory for their lootbox. With eBay, you'd be able to do all of that, too, except you'd be selling directly to someone else through a consignment service - more pricing freedom.
And then you could start doing it with things other than cards.
I can't tell you where the nearest GameStop is because afaik they don't have any locations in my country. Can find half a dozen convenience stores that will handle eBay (or Amazon) goods for me within walking distance.
They are wildly different businesses. Ebay is not in the business of holding physical goods, they are a marketplace that connects buys, sellers, and shippers and adjudicates fraud, collects funds, handles taxes, etc. They are not a warehouse.
Gatestop is a retail operation that buys and sells goods. It takes on all the liability for fake products, it puts capital on the line to purchase used goods, it is a totally different (and worse) business
That’s not correct. eBay owns TCGplayer which has large warehouses and does direct shipping & fulfilment sales (tcgdirect).
eBay already had warehousing ops, I assume larger than tcgplayer’s.
Last year, eBay shut down tcgplayer’s only fulfillment facility in Rochester, NY and switched to using eBay’s facility in Kentucky.
That wasn't about size, it was a labor play. The NY workers were negotiating for unionization for 500 days because of unfair conditions and low pay.
I would have projected the same outcome though.
Quality of TCGDirect operations, from an enduser perspective, took a nosedive with the move and never recovered.
I am familiar with all the particulars, check my HN profile ;)
INDEED! Congrats on your recent successes and I really like your product!
As a seller and as a buyer.
> 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.
"How do you make money? Spinoffs, split-ups, liquidations, mergers and acquisitions." - Mario Gabelli
Just sample from these with replacement sufficiently many times and you're all set. At the very least, you'll owe people so much money that they'll have a massive interest in helping you.
That is a massive “if”
Which is a laughable argument.
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.
It that's bad for GameStock shareholders, surely they'll vote against it?
Do they get a vote?
It depends. If Gamestop is able to find the efficiencies that the CEO is claiming, EPS jumps between 50 and 100 percent. Gamestop shareholders get diluted down to owning a smaller piece of a much bigger earnings pie. That's if you don't engage in any conspiracy theories about how many shares retail traders really own (don't go down that rabbit hole).
Suffice it to say, the Gamestop's price floor has gone up each time it's been diluted in the past few years. Perhaps lower highs, but higher lows. And a company that can afford to try a stunt like this.
True, that is why I said "very possibly". The market seems mildly positive about i so far.
its a big promise. Is Ebay really THAT badly run that they can find such efficiencies?
The market being mildly positive probably doesn't mean much when it's a memestock...
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 “
> the should-be-illegal process of putting debt on the acquired company's balance sheet.
I agree it's weird but ultimately the check against dumb lending is natural consequences for the lender, right? If you ask me for billions in loans for your zero revenue company and I give it to you, whose problem is that but my own?
In the modern world if you are a bank you will be bailed out eventually, thus your problem becoming everyone's problem.
The 2023 mini banking crisis has its own wiki page and it's quite informative. Of the three banks involved, one bank saw its shares drop 97%, another "shareholders lost all invested funds" and the third got auctioned off for pennies on the dollar. No investors were bailed out.
Banks go bankrupt all the time. Community Bank and Trust of West Georgia went bankrupt just 3 days ago. The Metropolitan Capital Bank & Trust that went bankrupt back in January. 99% of the time the investors are completely wiped out. Bailouts almost never happen, which is precisely why it's such big news when it happens.
Ah-hem SVB?
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 of the same smells as other bailouts - weighing moral hazard vs systemic risk.
“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.
My point exactly.
An outlier in historical terms (i.e. the last 20 years)
https://projects.propublica.org/bailout/list
The problem is that leveraged buyouts allow me to effectively inflict that debt on other companies, making a buyout offer the existing shareholders won't be able to resist and then reorienting its operations around servicing the debt I took out. In fact, lenders arguably favor this, letting me use the company I'm acquiring as collateral to acquire more debt at better terms than would otherwise be available.
Of course lenders will lend more against more collateral. That doesn't mean it always ends happily.
The lenders get their money back via management fees. Pretty much only the consumers and the employees get screwed over
For the most part, the lenders are not the people receiving management fees.
It's the problem of all the employees (and potentially customers) of the company being plundered.
They have no say in the matter, and given that the lender can probably absorb the loss without, you know, missing mortgage payments or losing health insurance, I would absolutely argue it's not just their problem.
You can certainly hold the opinion that "it's just business" but it feels like an unnecessary part of business that very often has real disruptive and detrimental effects on average working people, for the sole benefit of rich people getting richer.
And yes I get that it's not just a PE problem, but PE is a big one of these kinds of problems.
This is a fundamental misunderstanding of the US employment model. Businesses can do all sorts of dumb things that end up making them unable to continue to invest in employees. The check against that is the greedy owners.
Regulations designed to ensure businesses never take risky bets lest they have to lay people off would be a nightmare of unintended consequences and surely in aggregate hurt employment.
I assume the person you answered is saying that level of risk taking should be regulated. Not that no level of risk should be allowed if they have to fire people. Surely there is a point where you want some guardrails, so the C-suite has to at least take in account their employees as part of their risk assessment
I don’t see it.
Is the idea that big companies take too many risks today? If so, I’d love to see data, because the usual knock on big companies is they become dinosaurs and risk-averse, and therefore stop innovating and eventually get displaced by upstarts.
You're bringing your own conclusions to this, I never said anything about regulation.
I was just responding to OP who said that PE plundering via debt loading is only the lender's problem when things don't work out, and I assert that it is not.
Employees often pay a much more impactful price when PE-driven cuts occur (whether by design or because the plan failed).
The people who work at the bought-out company who will then be fired due to PE now gutting workforces to pay off the debt. Laborers are getting the shaft
If it was just you personally, sure. But a bank failure affects lots more people than just the bank.
Market cap will price in the debt, as it always does. Empirical evidence (dig through Google scholar) finds that cash assets, debt, profits, settlements, and the like, all are reflected in market cap changes at over 99% accuracy (the 1% is from measurement noise, so it may well be 100%).
Making debt of that form illegal would kill any company that needed money to stay afloat, such as during some emergency, or war, or COVID, or tons of events that companies regularly survive.
It is not at all clear to me why people get upset about using borrowed money on the balance sheet of the acquired company.
Say company B wants to buy company A. Company A is worth $20B, but the buyer doesn't have that much, and the original owners/shareholders want to get paid. So Company A takes out a $20B loan, paying out the original owners, making that company worth $zero. Now Company B gets it - it's still worth zero because of the fat loan, but now Company B is the owner. I don't feel like anybody got taken advantage of in this financing model.
In fact, this is pretty close to what happens in the US real estate market. When I buy a house I take out a loan against that house. It's non-recourse, so it's very much like the house borrowed the money, not me. In any case, I got the house with a lot less money than the purchase price. Sometimes nearly zero from me in fact.
I do understand why people get angry about what often happens next - layoffs and such - but I think that's very independent of the financing used to purchase the company. The acquirer could pay all cash using money from it's own bank account, and then still lay a bunch of people off - and in fact that often happens.
Yes...but isn't his employment contract structured to incent this kind of move? His pay is 100% at-risk in the form of 170M+ stock options that only vest if he hits some astronomical targets.
I'm just not sure his rationale is completely objective given such a structure...
> I'm just not sure his rationale is completely objective given such a structure...
Which is why the board would have to approve the deal and he can’t act alone on it. He was hired to create and execute the strategy including finding the target. The real question is, why did he get hired to do something anyone could have done?
If the market is "efficient", then the debt should work against the market cap. For example if we assume a $50B offer at 50%/50% debt and stock, then we should expect the market cap to only increase by $25B. And for GME shareholders, they should expect their stock price to stay roughly the same because that $25B market cap would be offset by a corresponding increase in the number of shares. The debt would increase the enterprise value of the company, which is the more comprehensive metric to use when trying to value a company as it takes into account both debt obligations and cash on hand.
Of course the market may move the price up or down based on how much they like the merger. If they think there is some synergy here, they may move things higher. If they think the debt is too burdensome or have other issues with it, they will move the price lower. But all things being equal, any market cap increase of a buyout should be offset by the dilution that was incurred to finance the deal.
What looks like a "hack" here though, is that Cohen tied his incentive structure to market cap and not share price. The fact that his award is in the form of options and not RSU's does add some incentive for a higher share price, but at the end of the day, it looks like he can get 100% of his award by simply buying companies using dilutive stock issuance. Not sure how much the GME faithful appreciated that at the time of the vote. I think Elon did something similar in his incentive package.
Whether the acquirer or target borrows the money, this would not allow to increase the market cap of the company. It would increase the enterprise value (because the debt allows you to make a bigger acquisition), but not the market cap.
I’m disappointed and surprised you left out half of the conditions that grant him this compensation. You only included the one that suggests that all he has to do is buy a bigger company with GME stock. It was literally the first paragraph of your link:
“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”
This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow, cumulatively, as well.
The first two market cap hurdle is almost certain to be achieved, and the second should be easy (its less than current market cap plus value of new equity to be issued).
I was under the impression that it was either or, not both. Either reach market cap goal or EBITDA.
I’m disappointed and surprised you left out half of the conditions that grant him this compensation and only included one that suggests that all he has to do is buy a bigger company with GME stock:
“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”
This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow as well.
It doesnt really change much, by buying a company its future ebitda will be included, it only delays the reward by some time. So yes he can just buy a bigger company
> other than the should-be-illegal process of putting debt on the acquired company's balance sheet.
This is silly. No different than buying a house w/ borrowed money based on using that house as collateral.
Banks aren't stupid. If it's very likely to fail and the interest doesn't cover the risk, banks won't risk. There's typically no upside to banks. At best they get their interest and at worst they lose everything.
> Banks aren't stupid.
Even a cursory familiarity with the history of the industry shows both that this is untrue but also that it’s leaving out many of the core reasons why finance is regulated. Bankers do make mistakes, but also their focus is on what makes them a profit now rather than what’s good for their client or the country long term. The bank does not care if GameStop goes bust as long as that happens after the loans are repaid or, most likely, sold. None of the guys who sold incredibly dodgy mortgages—if you weren’t in the market in the late-2000s, they would literally let applicants pencil in their income and not check it—went to jail for packaging those mortgages up so many times removed that they couldn’t reliably prove the loan even existed and reselling them with inflated ratings, and absolutely none of them had to repay their bonuses. Once they found a buyer for an “AAA” derivative, foreclosure was a problem for the retirement fund left holding it after a couple of sales.
That’s what I’d expect here, too: they’ll make some flashy announcements to juice share prices (“AI powered auctions paid in crypto!”) and sell that debt, spin whatever’s left into a subsidiary which splits off, and then profess complete surprise when that goes bankrupt.
> Even a cursory familiarity with the history of the industry shows both that this is untrue
The modern trend of believing that “history” is made up of one or two things that everyone saw on the news is actually really entertaining. Definition of “cursory understanding” tbh.
The banking industry, historically is far from stupid.
This particular story is just basic PR driven market manipulation and has nothing to do with the banking system.
> The modern trend of believing that “history” is made up of one or two things that everyone saw on the news is actually really entertaining.
It would be useful if you could provide a more detailed version of your argument. I don’t think you seriously believe that banks don’t make mistakes but the way this is written does sound like you’re saying it’s highly unlikely while ignoring the other half of the sentence you quoted.
> Banks aren't stupid.
If they can gamble with other people’s money then why won’t they.
If they can get rid of those liabilities by offloading them in a hidden way why wouldn’t they.
If it all collapses and the government bails Them out, oh well.
It is different. You need somewhere to live. Buying a second home with what would presumably need to be at least a 90℅ mortgage is at best questionable.
I think your example if proving their point: that's exactly what happens and is incredibly common.
Cohen is already rich rich, his GameStop compensation doesn’t really matter much. The eBay acquisition could be a strategy to juice his compensation but I think it is much more likely he does believe that he can achieve his stated aims, which will financially benefit him much more in the long term.
> Cohen is already rich rich, his GameStop compensation doesn’t really matter much
I think this argument is much stronger in the opposite direction: if his motivations were not focused on accumulating wealth, he’d be retired or running some kind of charity once he was that far past the point where he had to work. The fact that he’s not suggests that he derives his self-identity from wealth and the guys who do that are rarely satisfied at mid-tier rich.
It’s not always wealth accumulation as driver. It’s often just chasing deals and fixing companies that is fulfilling for some people. But, it’s also the thrill of the hunt and he’s effectively a big game hunter looking for a huge trophy.
He wants to be the next Warren Buffett, I believe this is a stated goal, or at least he’s been very clear that this is his inspiration. He wants GameStop to become the next Berkshire.
I'm not sure the fact that somebody is already rich rich would make them less likely to perform ethically dubious practices to juice their own compensation. In fact I'd say the opposite is more likely.
Few CEO’s in the US are rewarded for longterm thinking when there are unsustainable quarterly gains to be made. GameStop also has a strange history, especially the last decade, that no one could possibly describe as “cautious” or “planning longterm.”
I also can’t name a single CEO who had the mentality of “I’m rich enough to make personal/financial sacrifices for the good of the company.” That’s simply not how things work. I’m sure an example exists but it would clearly be an exception to the rule.
Nintendo CEO cutting his salary in half to avoid firing employees
https://www.cnbc.com/2024/02/13/nintendo-ceo-once-halved-sal...
Yes and it was 1) incredibly notable, 2) 13 years ago, 3) in another country, and 4) following one of their worst performing products ever. Iwata's (maybe voluntary) temporary pay cut was big news because of how exceptional it was.
I was giving you a name, given you said you cannot name one. I do not disagree it is an exception
“Few CEO’s in the US” was the context just for clarity
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 sounds nice on paper but he isn’t really doing something revolutionary here. He also has rather ambitious numbers to hit if what I’m reading is accurate, so it makes sense he’s taking massive swings like this. We’ll see if it happens, let alone pays off.
It's not "as of a few months ago", he has never taken a salary as GameStop CEO.
If there's anything rich people famously hate, it's making more money.
Unlike poor people who are indifferent to money.
Long-time ebay seller here. I'm seeing comments floating towards the top that are essentially positing that the physical GameStop locations can be used as hubs where people can buy or sell their stuff in general (especially items that are 'pick-up only'). A pawn shop, basically.
Thing is, GameStop is, well, for videogames and videogame paraphernalia. It's not a general store. Doing this would turn them into a thrift shop, not a pawn shop, as people are trying to offload their carpets, desks, etc - bulky stuff.
I don't think this makes sense.
This does make sense when you consider the collectable market, another domain I'm involved in. Trading card games, specifically pokemon, have exploded over the last 5 years. GameStop is making a killing off of buying, selling, and grading these cards. Ebay is the primary marketplace to buy and sell those cards. There's also tax free havens ("Vaults") offered by multiple companies, grading service passthroughs, and scalping offered through ebay too.
Viewed through the above lens, that's what's prompting this offer, I think.
I think a lot of people are missing that eBay bought TCG Player back in 2022. This would fold the TCG Player brand into GameStop. Many (most?) local game stores list their inventory on TCG Player. In addition to the physical stores themselves, GameStop would have their hand in nearly every digital trading card transaction. GameStop would own the TGC Player warehouses and inventory.
Tcgplayer is mostly a marketplace, I don't think physical presence does anything for them.
Numbers I see for GameStop collectibles revenue
FY2024: $718 million
FY2025: $1.06 billion
GameStop CEO was on CNBC and acted like a total dick the entire time after they asked him how financing would work for this deal [1]. It appears that he's upset that Squawk Box previously stated that GameStop is a bankrupt meme stock. This is probably one of the funniest CNBC interviews I've seen.
[1] https://youtu.be/Bmj2PaxX24E
r/wallstreetbets has been having an absolute field day with this interview, gotta admit it's pretty hilarious.
I guess wallstreetbets can giveth (given they're probably the primary reason Gamestock even still exists as an independent company today) and taketh away.
I have to imagine that this performance was intentional and this guy is not just out of his mind.
Just find it difficult to imagine anything outside of market manipulation: either an eBay pump and dump scheme, or collusion to get investors to sell as the inflation comes down so activists can pick up more.
I did some digging today and learned that he currently takes no salary and stands to make an unbelievable amount of money if he hits certain (pretty unreasonable apparently) benchmarks. I think it was $35billion. My very armchair guess here is that he’s just trying something incredibly loud, brazen, and ambitious because at this point what else can you do? They’ve been falling apart for years, the business has not turned around at all even after the wildly inflated shares they sold to get some liquidity.
He’s already rich and GameStop is falling apart, so really what’s the risk to him if it all goes under? May as well try a moonshot and move on. It’s not like anyone will hold him accountable for failing to turn around a ship that was already deemed sinking many years ago.
Could be. But he has to secure board approval for doing something like this. So he apparently was able to convince the GameStop bod that this is a reasonable play.
One has to wonder if there's an unstated interested party ready to back the deal.
Very good point. While I’m very skeptical this will even occur or that it’s a good idea, there is certainly some logic to it. The question is are they all joining in a group delusion, an opportunity to make their final big bucks and walk away, do they really see a path forward, or is it something else entirely. I guess we will find out lol
I mean its on the website...
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 KKR.
Basic formula is raise cash using junk bonds, buy company, fix up company or kill off costs, use money company earns to pay debt, sell company. Since you have leveraged, your payout can be large.
It's a similar style financing activity to a house flipper. example: buy house for 1M, but pay $200K + 800K debt (mortgage). Fix up house, sell for $1.2M. Pay off $800K debt. You're left with $400K, or 100% return!
Minus fixing + selling costs
GameStop doesn't have (even close to) $55.5B. Their offer from the letter is literally impossible:
> Our offer is $125.00 per share, comprising 50% cash and 50% GameStop common stock
Even if you magically included all existing GameStop stock in the offer, it still would not comprise 50% of $55.5B.
EDIT: looks like it's not impossible and I misunderstood. It's a proposed change of leadership with a $25B injection of cash to sweeten the deal. GameStop would issue shares which would capture the original eBay value (since GameStop would own eBay after the trade), making that part a wash. At least assuming people owning eBay stock currently would value the combined company at at least the sum of their parts, which is a big if.
> GameStop doesn't have (even close to) $55.5B
When the merger concludes, the former shareholders of eBay will have $27.5bn of GameStop-eBay stock and $27.5bn of cash. (“Cohen said GameStop has a commitment letter from TD Bank to provide up to $20 billion in debt financing” and “GameStop has around $9 billion in cash on its balance sheet to put toward a deal” [1].)
[1] https://www.wsj.com/business/deals/gamestop-is-offering-to-b...
I don’t understand why eBay shareholders will suddenly want GME memestock and find any interest in voting for this.
they will be getting 20% more than what Ebay is worth today
Once. Followed by a tank in price and descent into chaos.
You can sell the stock. This isn't complicated.
Won’t eBay shareholders own most of the combined company though? They won’t all be able to exit at the sale price.
True, it isn't complicated. With everyone rushing for the doors the price will rapidly tank.
Selling is a taxable event
Only for individuals, isn't it? Mutual funds etc don't have to pay CGT on everything, do they?
It looks like mutual funds pass the gains, and the tax, onto those holding shared of the mutual fund.
> Because mutual funds are pass-through vehicles, they are required by law to distribute most of these gains to shareholders each year. These are called capital gains distributions.
Other types of funds don't necessarily have this problem, or lessen it.
> Holding mutual funds inside an IRA, 401(k), or Roth IRA shields you from annual tax bills.
> Index funds: Passive funds trade less frequently, leading to fewer gains.
> Tax-managed funds: Specifically structured to reduce taxable events.
> Exchange-Traded Funds (ETFs): Use an “in-kind” redemption mechanism that avoids triggering taxable sales.
https://mutualfundnation.com/mutual-fund-capital-gains/
Neither is ignoring the offer and continuing to hold, if you’ve already been in for two, five, ten, twenty or more years like some have been.
I don’t understand either but wouldn’t they still be owning eBay? Just with GME?
They own eBay + GME + some financial alchemy. If you aren't a financial wizard you should assume that the value of the financial alchemy is negative. (Because 99% of the time it is.) Now, what are the synergies of eBay + GME that outweighs the chaos caused by the merger and the finance stuff?
I’m not totally sure how it would be structured but if GME is the purchaser then the merged company would be listed under GME and eBay would become a brand in the GME group and no longer a stock listed under the eBay ticker.
The whole thing seems incredibly dubious and fishy. The eBay board should vote this down which is why the CEO of GME has already realised that and said he’ll appeal to the shareholders directly. If eBay wanted to load themselves with twenty billion dollars of unnecessary debt and extra complications which would kill the company then they could do it themselves. They’re not in that kind of business.
There is, literally, nothing fishy about this offer. It’s a cash and stock offer from a public company to public company shareholders. We could call the financial or shareholder benefits to ebay dubious (I don’t hold any opinion about this) but this is a very aggressive offer, and allows the chance for GME to keep some cash - if enough shareholders of ebay opt for stock, then they’ll have cash available after. Plus they’d keep whatever current net assets ebay has.
ebay was at like 100 before the offer went out, it’s trading up to 120 or so in early hours this morning, so speculators and institutional desks do not find this offer fishy or dubious - they are pricing it as likely to be pretty well received.
As a side note, one of many plays you might make in this situation is what Cohen has done here; they bought a bunch of options. Those options are now worth a lot; before the letter if it was all options, they controlled $2b of EBAY shares, today that’s $2.6b. We might imagine the options at least doubled the underlying return. The market had not priced in a rapid jump to $120 when he bought them. If the deal closes, then this will put at least another billion or two of liquid capital into GME.
The end of your post negates the first line of it.
Its just financial engineering.
But his mention that it is a form of options is laughable. Thats not what is going on here.
Buying calls before a credible buyout pitch is a pretty standard strategy -- good leverage, what's laughable here?
The credible part.
TD Bank also believes it will work, i.e. return them a profit.
They've seen the detailed plans and I haven't. But they're the ones with real skin in the game. It seems like an opportunity for them to lose their shirts.
So yeah, eBay shareholders should take TD Bank's free money and run.
TD Bank is the perfect lender for this.
https://www.fincen.gov/news/news-releases/fincen-assesses-re...
TD Bank believes it will make them a profit. Their interests are not those of eBay’s shareholders: if they can juice the financials long enough to sell their loan, they don’t care if the company goes bankrupt the minute after that sale closes.
Or ignore the free money/destroy company offer and hold.
Isn’t that just a https://en.wikipedia.org/wiki/Leveraged_buyout ?
That's just for the cash part. The stock part makes no sense. For this 50/50 deal to work in principle, they'd need to issue around a billion new shares, which would massively dilute the existing ~450M shares. So Ebay shareholders would suddenly own 70% of Gamestop after the deal. It's also highly questionable if investors actually believe the combined stock is worth that much, so the stock price would probably fall and turn those 70% into >90%. At this point it basically becomes a reverse acquisition plus a large loan for the final company from the cash part of the deal.
This is not atypical; smaller company “buys” the larger company with debt on the larger company’s books. The blended shareholder mix is mostly the larger company; management comes from the smaller company.
The one I was most familiar with was the Discovery “acquisition” of Warner Brothers. Though apparently that’s a little complicated because AT&T was divesting itself of Warner.
Yes. See [1] for an overview of how this works.
When the SEC filing is made, we'll get to see how the deal is structured. The $20 billion from TD Securities becomes a debt obligation of the combined company. There's a tax break in equity to debt conversion, and a second tax break for carried interest. [2] There may be a preferred stock deal or debt refinancing so that TD gets their $20 billion back. Usually, the private equity firm exits within a few years.
[1] https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.23.1.121
[2] https://www.pgpf.org/article/what-is-the-carried-interest-lo...
No, it's not a leveraged buyout
Sure it is. The acquirer is borrowing money for the buyout, and the debt will become a debt of the acquired/merged company. That, by definition, is a leveraged buyout.
That is not the definition of a leveraged buyout.
This is a public-to-public merger. Some mergers and acquisitions are financed with debt. That does not make them leveraged buyouts.
LBOs are private equity deals in which there's no issuance of public stock. The equity portion is, well, private equity.
Source: I've advised over 100+ clients on billions worth of M&A and LBO deals in my time as an investment banker in New York.
No, unless any control transaction using any leverage counts.
A third of the deal is financed with debt. A fifth is financed with cash. The bulk—fifty percent—is being financed with equity. An LBO would see debt and a thin tranche of cash finance the bulk of the acquisition.
The stock part is more like a merger than a buyout.
Yup.
It's newly issued stock, a common form of making acquisitions cheaper
How is a 20bn company going to issue 27bn worth of stock? Or are they just going to pretend the newly issued shares are valued the same per share as existing stock is right now?
Because it acquires an asset worth roughly that much, it’s neutral. GME is (probably!) not doing a huge at-the-market offering, they’re creating the shares and immediately giving them to eBay shareholders.
In practice the price paid for the company being acquired is usually a bit higher than the market value (so the shareholders take the deal), and the market usually punishes the acquirer a bit and the resulting entity’s stock will fall a bit. (This is most definitely not investing advice.)
the stock they'd be issuing would be for (GameSpot + eBay) whereas the current stock is for GameSpot alone
via a cunning pump on Wall Street Bets
Both stocks went up in value after the announcement, so it's a good sign that if it comes to it, eBay stock holders would vote for a merger, because they value the combined company at at least the sum of their parts.
why do i keep seeing comments of this sentiment? can't they just take loans? I thought there were serious consequences to making an offer, and then backing out , especially if the other party accepts your offer.
It’s wild to me that you believed that they would make an impossible offer.
man, those GME bagholders are gonna love diluted shares.`
They already increased total number of stock by +39% in last 12 months, GME will squeeze the last penny from those people.
… and the stock has not dropped 39%, in fact it’s trading about where it was a year ago. Shareholders have been content to let Cohen add to the balance sheet, adjust operations and make a large move. This is one such move. And GME is up 5+% in pre trading, so shareholders are generally positive about this idea.
If Cohen's "large move" was to buy EBay, investors could have done that themselves. They would have gotten a better deal on shares in the new company. Also, they'd be up 50% over 12 months. Partly because Cohen "adding to the balance sheet" has meant dilutions, and there will be more for this deal.
Yeah this is the funny part to me - if you thought EBay was an amazing business then you could have just bought that stock months or years ago. Maybe the combined company will really be worth more than both companies individually, but for the most part this is just GameStop deciding how you should have invested your money months ago.
Technically, we only know that the marginal non-shareholder is 5% more positive about the idea, since the price represents what the marginal buyer and seller are willing to transact at. The only shareholders involved in the increase are actually selling.
the shareholders of GME operate under the delusion that there's gonna be another magic short squeeze.
Waiting for the MOASS… it’s coming any day now!
I operate under the delusion that it was a $400 gamble and there is no point selling stock that I forgot I even owned at all, when it's such a small amount.
Perhaps that is part of the scam here. Meme stock buyers will think this means something and will spend more on worthless shares so that ebay executives can sell.
They can sell now and pocket some extra money. What's not to like?
If bagholders were capable of buying low and selling high, they wouldn't be bagholders.
you think all the bagholders are in at the current price?
If they didn't like the current prospects they can bail at a profit.
If they do like them they have no excuse if things go south.
Have your ever heard of debt? They have a 20B line secured from TD.
Yes, that goes into the '50% cash' part of the offer. With a 20B credit line and 7.5B cash from their own coffers (which they claim to have, so let's believe them on their word there), you cover the cash portion.
The issue is the non-cash portion of the offer. They claim that the remaining 27.5B is covered by GameStop stock. But that's more than double the market cap of GameStop.
> which they claim to have, so let's believe them on their word there
So you're just outright accusing GameStop of fraud?
https://www.sec.gov/ix?doc=/Archives/edgar/data/1326380/0001... page 36 of their filing with the SEC lists the cash and marketable equities.
The non-cash (stock) portion of the offer needs to be valued against the resulting entity, which will own eBay. This will likely result in current eBay shareholders owning half or more of the resulting entity. (Though we don't know specific numbers yet). That's normal for a M&A where the smaller company is doing the buying.
> So you're just outright accusing GameStop of fraud?
I have no idea why you interpret my words that way. I just meant that I didn't want to analyze the cash portion of their offer any further and just wanted to take it at face value.
They don't claim to have it; they have it.
It's like saying 'tobacco allegedly causes cancer' - the proof is very public and available. The typical reason for saying it like that is to indicate you don't believe it.
With the approval of the board of directors (in most cases), a company can simply create new shares and give them to whomever they like.
I would guess that this information will bother you.
If it helps, because many public company executives are compensated on earnings per share, most C level teams are incentivized to buy back shares, thus decreasing the denominator for the EPS calculation without changing fundamental economics of the company.
If this also bothers you, you should guess what Buffet says and thinks about those two dynamics, and then read up on it, and you will learn something interesting about public markets!
I’m sure if eBay wanted to build 1800 brick and mortar stores they could do so for less than twenty seven billion dollars.
You understand that the gamestop stock would then be owning ebay, thus be worth Ebay + Gamestops Valuation?
Alright, my company MEME offers to buy Apple then for $1 plus 100% of MEME's stock, which is worth more than Apple then since it will own Apple.
If you word it like this it's just a hostile proposed change of leadership. Weird way to apply to become CEO of eBay, but sure.
You can do that.
The shareholders have to vote for it, though.
They would also be owning a company that now would have +20B in debt.
They now own ebay. They would include in that math 20B in debt plus Gamestop.
This sounds like a pretty bad deal for ebay investors.
Are they under any obligation to ground the value of their own stock or can a salesman simply claim that the "true" value of that stock is much much more than it currently seems to be?
Stock is worth exactly what people will pay for it. Ebay share holders get to vote to accept or reject this deal
Presumably stock market valuation is grounding?
Also, eBay shareholders can vote down the acquisition if they don't think the deal is good for them.
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 impossible?
There’s one comment as of the time of your post that makes this assumption - you could have replied to them directly.
It is implicitly implied in many comments.
“Implicitly implied” is redundant. Either of these phrasings would suffice:
> It is implicit in many comments.
> It is implied in many comments.
Well, it's called "tautology" and it's a perfectly valid rhetorical device.
A tautology is a sentence vacuously true. This is called a pleonasm.
Was about to post the same thing. It is indeed the under-appreciated pleonasm rather than a tautology.
Yes, mixed the two. Point stands though.
Links?
I see a single comment mentioning it is impossible. No sign of a collective declaration. I think you’re overreacting
I think you are under reacting.
>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.
Example from quite some time ago: Avast buying AVG. The value of AVG was around twice that of Avast.
AOL/TimeWarner, Kmart/Sears… lots of prominent examples.
Interesting how none of these are around anymore
Also when Capital Cities purchased ABC. A popular phrase coined by the media was "minnow swallows whale"
https://www.nytimes.com/2022/05/25/business/media/thomas-s-m...
And much more recently: Paramount Skydance / Warner Brothers.
I imagine the vast majority of us do not have a problem understanding smaller companies can buy larger ones. Most of us are just incredulous that anyone is taking GameStop, especially Cohen, seriously.
Why wouldn't they? Before he showed up, Gamestop had years of negative earnings per share. They haven't had a negative EPS quarter in almost 2 years, now. That seems like a serious turnaround.
You’re omitting the fact that they’ve had declining revenue YoY 4 years now, with no sign this won’t be year 5. Their liquidity is primarily the result of leveraged debt and sold off shares. They have had to seriously downsize, including shuttering tons of brick and mortars.
You’re picking one single metric that’s not even consistent for 2 years to assess the health of the company. It feels rather cherry-picked. The whole story is very rough for them right now, they’re in trouble.
I think we also all assume that it is probably not a healthy feature of capitalism.
But if it all goes sour nobody will be held accountable and two not one company are ruined.
I don't see how such leveraged acquisitions should be legal.
They better not ruin eBay, it's actually a useful business, I use it all the time
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.
Speaking as someone who used to know absolutely nothing about the world of high finance, yes, it is too much to ask.
Before I started paying attention to such things I wouldn't have known a single one of those terms to even begin googling.
And let's be honest here. A smaller company saddled with big debt buying out an even larger company really doesn't make logical sense. It makes financial sense, which is subject to different laws of mathematics, probably involving the waiter's check pad in an Italian bistro.
Agreed that Marvin would find this (and everything about Earth) ridiculous.
I propose this would make sense in the animal kingdom though; large, lumbering fatty walks along. It has big claws, but … it doesn’t look like it can be bothered to be dangerous anymore. Meanwhile a pack of hungry successful hunters walk alongside. To take this down, they will risk pretty much everything..
It’s the same story. The shareholders provide a sort of bet on if the big guy has still got it, or the risk-on hunters do.
That’s why the operational results got attention in Cohen’s letter — he’s telling Shareholders: “I turned around GameStop. I can turn this ship around, too.”
GameStop has zero debt and billions in cash on its books. It is not a stretch for them to be making this offer. It really does make sense here for both sides.
> Is it too much to ask the Hacker News commentariat to do one quick search
Are you new here?
> A quick search for how leveraged acquisitions, stock-for-stock deals, financing commitments, or tender offers work would answer most of the objections.
Isn’t the assumption that it’s impossible intuitively justified if you have no background in finances? A small fish usually can’t devour a bigger fish either.
Also, all those terms you mentioned mean nothing to me. You can’t search for what you don’t know exists.
This is just a leverage buyout and it will likely result in the slow death of both parties while there is value extraction for those in control. Think Sears, Toys R US and similar.
The CEO has a very specific deal where he gets paid significant compensation for specific valuations, which this is likely to achieve. That is value extraction at the cost of shareholders who will be on the hook for the leveraged loan and which will likely wipe them all out over time.
Gets paid compensation in stock. So if shareholders lose value, he does too.
Not exactly,
https://investor.gamestop.com/news-releases/news-details/202...
He has to hit both the market cap and EBITDA for each tranche of his compensation plan to vest. He could do this by growing the core business, or by doing a merger like the proposed eBay one. Even if such a merger was very dilutive, even value destroying, it could help him vest a tranche he otherwise would not, for more value than the dilution reduces his position.
To be absolutely clear, I hope+think in practice that he is aligned with shareholders, especially given that the market cap restrictions appear much easier to hit than the EBITDA ones, but it's important to be precise because there's so much misinformation going around.
Well, how much more value? It seems like an awful lot of work to make thousands, if not millions, of shareholders very angry with you, if he's just adding cents-per-dollar to his net worth.
I'm not saying that that isn't his aim, and I've definitely considered that a Vader Imposition is in play. But it seems like there are easier ways to make that kind of money without becoming Public Enemy #1, smack-dab in the middle of the "eat the rich" zeitgeist.
I believe ebay should put itself up for sale on ebay instead.
Auction or "buy now" with price suggestion?
I once saw a pair of "very used" ready-to-rumble promotional boxers for bidding at $99 or buy it now for $1300
GameStop would buy it and then not even pay, then eBay would be like wtf now I have to relist myself
Oh, the GMV bump would mean a nice bonus
CNBC Interview with Ryan Cohen:
https://www.youtube.com/watch?v=Bmj2PaxX24E
I see praise on Reddit (by GME stockholders, of course) saying that this makes him appear like some tough rebel standing up against the evil mainstream media... but I'm really not seeing it. To me it seems like a very tired (inebriated?) guy in a leather jacket who can't comprehend or answer a very basic question. Is this what passes for being a good CEO these days? I'd expect them to be able to at least come up with a vague response instead of claiming they can't comprehend that one number is bigger than the other.
I don't know what I was expecting but I didn't walk away from that with any confidence in Ryan's abilities.
The company (stock) subs are always echo chambers of the worst kind, bordering straight up cults.
Bed Bath & Beyond (BBBY) being one of the worst / most hilarious ones.
This was so hard to watch. "Half stock, half cash" is such an insane shallow level of detail provided for a 55.5 billion takeover.
2021: a Reddit short squeeze kept GameStop from going under. 2026: GameStop is bidding $55B for eBay, a company 4x its size. If it lands, this might be the strangest full circle moment public markets have ever produced.
Is it still riding the meme stock wave or has GameStop made a turnaround?
I believe it is still a meme stock in the dark, "lose money quickly" corners of the internet.
Liquid Assets:
May 2020: $570.3 million
Jan 2026: $9.013 billion
Keep in mind, this is not because they turned the business around and made tons of money. Sales are lower now than in 2020.
Investors gave them this money; they sold additional stock to raise $3.47B in 2024, and another $4.2B of convertible debt in 2025.
They have not made a ton of money yet, but they have turned the business around in a significant way. Where GameStop lost money every quarter from 2019 to 2023, it has now had 8 profitable quarters in a row.
The fact that investors are giving GameStop money is a good thing for GameStop; It is a signal of confidence. It is not a detriment like you try to position it.
They also just closed another 470 stores this year. Sales are half of what they were in 2019.
Basically they got a huge cash infusion from memestock hodlers trying to get to the moon. Greater than half of their profits are now from the interest on that money, which is wild.
However, the retail business itself is still failing because no one buys video games at the mall anymore.
Including a few thousand bitcoin [$]
---- henlow, fellow regards ----
Any questions for muh'smoothest'brain?
[$]: 4710BTC, to be exact
Who would down vote this? It’s true.
Can people here really not keep their emotions in check enough to admit clearly obvious facts?
> Who would down vote this? It’s true.
It's not an answer to the question of a turnaround, and therefore low quality information? How much you have in assets does not correlate with the ongoing success of the business. Examining the day to day business of Gamestop and excluding the memestock shenanigans leaves a very bad business.
The core business has declining revenue - net sales 2016 $8.6b, 2025 $3.5b and still in decline. Cash flow from operations also continues to shrink.
Store footprint has shrunk.
The underlying business stinks, even if they made a ton of money selling stock, they haven't done anything significant to halt the spiral.
To the poster below asking if I'm drunk. Please provide some sort of revenue citation to 18x? https://stockanalysis.com/stocks/gme/revenue/
I guess you missed the part where they turned around and became profitable.
Perhaps a simple analogy would work here - you made $86,000 in 2016, and had a $6,000 surplus that represents your profit. In 2020 you made $50,000 and spent $5,0000 of your savings to stay afloat. You shrink your lifestyle. Now in 2025, you make $35,000 a year, and have a $2,000 surplus. There are no prospects for more income and you expect to earn $32,500 next year, and maybe $30,000 the year after. Would you consider this a turnaround for your finances?
Likewise, the company's revenue has declined ~60% in the last ten years, and declined 5% from 2024 to 2025. The business became marginally profitable when they shrank the business by reducing operating expenses and produced a small profit.
There are no significant avenues for growth in their current business model, revenue will continue to decline, as it has for the last ten years because the core model of re-selling used games continues to shrink. As revenue decline continues, they'll run out of people to lay off and stores to close, there will be no profit because the revenue is too small, and the company will BK.
There is no turn around, the company continues a death spiral.
Again, facts, they have 9 billion in cash. How many companies have that on hand?
You seem to be making some of your statements as if they exist in a vacuum. The context is easily half the story.
For instance, do you know where that $9 billion in cash came from? It was not revenue I’ll tell you that much. Their revenue has been rapidly dropping, they’re shuttering stores, etc. They didn’t get that cash from successfully turning around operations.
The entire conventional zeitgeist is denying plain truths that hurt your self image.
It seems consistent that the same thing would happen here.
Another interesting observation to me is not that Gamestop was able to go from this full circle moment but rather the fact that Reddit has such influence that it was able to create the conditions which led here.
If Gamestop is the king, then reddit was the king-maker.
Many people noticed the math doesn't add up, e.g. in the CEO's interview here [0]. Am wondering if they are betting on the stock going up because of the news so they would then be able to fund the deal.
[0]: https://www.businessinsider.com/gamestop-ceos-awkward-interv...
I think Ryan handled that badly because he didn't believe the question was serious.
They're offering 50% cash and 50% stock. At an eBay valuation of 56B: 20B of cash will come from their creditor, TD Bank. 8B will come from GameStop itself. 28B will come in the form of stock from the resulting entity, which will own eBay and presumably have a valuation north of 56B.
The resulting entity may end up having 50% or more of it's equity allocated to the existing eBay shareholders. This is normal for a M&A where a smaller company buys a larger one.
"Normal" for M&A, and if you drink enough finance kool-aid it even makes sense, but then you step back, and go wait, no it doesn't!
Does it make more sense to you phrased as "GameStop offers to purchase controlling 50% of eBay for $28B" ?
The problem is it does!
Very specific corners of the internet are losing their minds right now.
A low tide leaves very few boats afloat, but these are lighter-than-air craft.
This very specific corner of the internet has no idea how your metaphor is supposed to work, which is why I like it so much.
This was not on my bingo card. Not sure why eBay would take this personally. They've had a solid couple of years and there is room to grow. Gamestop on the other hand I'm not sure will exist in 10 years.
Previous discussion: "GameStop Preparing Offer for eBay" https://news.ycombinator.com/item?id=47985271 68 comments
Most business nowadays is related to financial transactions instead of building new products or services
The real economy seems to be burning but Wallstreet acts as if it didn't matter.
Data center build-outs and AI investments are huge. They make the combined numbers look almost normal, but if you're not in the data-center construction business, the US is already in a recession.
Not a headline I ever thought I would see. Kinda crazy how meme stocks and retail hype has led to this.
Is this LBO a ridiculous enough of a proposition that you are going to email your senator and or representatives to complain about LBO loopholes in corporate finance law?
I didn't think so.
I wish them well!
Do they have the cash to buy them ? If not, why should we provide the limited liquidity that our banks have to finance this?
This logic should apply to all corporate acquisitions. You want to buy another company? Use your own cash and equity. No need for us to be exposed to your risk.
This will also reduce the predatory private equity takeovers.
The offer letter: https://www.sec.gov/Archives/edgar/data/1326380/000119312526...
Is this going to turn Gamestop stores into something like those "sell it on Ebay" stores?
No, its going to give the CEO and some shareholders a few billion and destroy eBay. Because we can't have nice things.
I am so painfully sick of this.
eBay isn't doing itself any favors these days, the site seems to have issues on a regular basis and they're heavily promoting collectible/gambling garbage on the site. If anything eBay and GameStop seem perfect for each other.
There's tons of stuff I wanted or needed that was easiest to find on eBay. And I also sold old things there. Idk idc what the market for anime trading cards looks like.
Hadn't noticed gambling...they keep shoving car parts into everything I look for. And their insipid live auction wannabe QVC Network nonsense.
"He doesn't understand your question, CNBC" - https://www.reddit.com/r/wallstreetbets/comments/1t3m56f/he_...
As someone who's primarily used ebay to buy old NES et al cartridges, this makes sense to me. (No comment on the price being offered though)
So they want to pay half of that with a meme stock?
This will be the end of ebay most likely if it goes through. Not right off the bat, but eventually. Just a hunch.
The hard part is seeing the strategic coherence. GameStop plus eBay is not obviously absurd on marketplace grounds, but the scale and financing make the whole thing feel very strange.
Not sure where the synergy is except that both sell used stuff. For their market shipping speed doesn’t matter and so their large store foot print is not useful either. This is just a play to become more meaningful and to have actual revenue.
If it means eBay stops front-loading every search I make with car parts in thier latest market 'pivot' I'm for it. They can dispense with shoving the tacky 'live auction' stuff and constant 'are you sure you don't want to sell something', even better.
Man the business school case-studies must be getting stranger and stranger by the day. What's the headline for this one?
So their crypto investment did not work out? Who would have thought! https://www.bloomberg.com/news/articles/2025-03-26/gamestop-...
Their bitcoin investment is what kept them profitable at times. Same as Tesla.
They can't include it in EBITDA
It did, actually!
I guess if people use eBay a lot to sell used games then there is something of an overlap there. Otherwise, it seems pretty weird.
That sneaker company that pivoted to data centers set the 'weird' bar pretty high.
GameStop has physical stores so could be a place to send, collect from or even verify high value eBay items.
> ...sneaker company that pivoted to data centers set the 'weird' bar pretty high...
"Weird" is the wrong word for Allbirds. "Fraud" is far more fitting. They obviously have no intention running an AI-datacenter business and are doing it for the stock-price rush. A small number of people will be laughing all the way to the bank, and everyone will forget Allbirds in short order.
Ebay has a history of being legit, though they have had a long list of uncanny acquisitions themselves (including Skype, which they later sold for a stiff loss). It's a pity they couldn't just execute on their core business and are now being acquired themselves by an entity using sketchy financial shenanigans.
Who's going to stop a few rich people with a pile of money and a stated intent of doing something they have no intention of doing? No one, I guess. I mean, there's plenty of examples. Supermicro is still listed on NASDAQ even though one of their founders was caught smuggling export-controlled GPU's in Supermicro servers to the tune of 2.5 billion dollars a couple months ago.
eBay currently allows (or at least tolerates) sales of items not in the possession of the seller and are effectively lottery tickets. Lotteries are illegal in my state (NV) but eBay does not restrict me from bidding. That's low hanging fruit right there.
Based on my own experience with GameStop, that will convince me to stop using eBay completely.
I'd be sad because eBay works great (even if their software is old and would need a complete rewrite).
Why does it need a rewrite if it works great?
Because it works great as a platform, and because I've been using it for 20 years.
But for a new user, it looks completely messy, with pages that are vastly different from each other and many sections that look exactly as they were in the early 2000's.
So does craigslist and I don't think I've ever heard people complain about it. Not everything needs to be a PWA, let websites be websites
I'm not sure 'it looks like it did in 2000' is worth tearing it all down, starting over, and introducing new bugs. Sometimes things just work. Ebay is very functional for a huge amount of commerce. It loads reasonably quickly and is reasonably easy to navigate.
You're saying your experience with GS is even worse than with eBay, right? How can it be?
EBay is running a platform (very successfully) not a pawnshop.
I did not describe a pawnshop function. eBay already has an authenticity service which also is not a pawnshop function.
If I understand correctly, I think the collectibles market is more in line with what GameStop is looking at here. They recently got into the trading card game including grading services via PSA.
Is that market really that large? That sounds very niche, but I don’t know the collectible world
Yes, so much so that cards that were sold at retail in 2024 after grading sold went from around $100 in cost to well over $1000 in 18 months, and this was me making the market. The prices have since 2.5x-ed on the same card (2024 Topps Chrome Sapphire Base #500 PSA 10). It's correcting a little, but a 10x rise on a card that is effectively not considered limited edition and most had placed in storage suddenly 10x and then 2.5x is quite rare, especially since it's a new card.
These are just public sales. Private deals are done with agents on both sides routinely and without any reportage. There's an element of gambling to most transactions but on the origination side, mostly because Topps, who owns licenses to the major sports leagues, are neither timely nor accurate in posting pack configuration odds, and seems to somehow have nobody competent enough to properly ensure that the same cards don't all get clustered in the same box. On multiple occasions I've bought cases where 3 out of 10 cards of a player were pulled, and multiple 2/10s. The checklist is only 100 cards. The case had 384 cards total. It's downright negligent, but screw the consumers, right? Thanks, Lina Khan, for making it all happen.
There's money to be made but it's a lot of dumb money mixed in with some very sharp acquisitions. Who knows how it'll play out. The market is inefficient largely because USPS is effectively a crapshoot in a time-sensitive market. The likes of Courtyard.io have only partially caught on, and ArenaClub, their competitor, ran for 2 years where a bookmarkelet allowed the user to turn what was supposed to be a random draw into a completely predictable purchase at way below market. Upon reporting, they just added a line in their ToS that put users in theory on notice. They did not fix the bug. They don't even have a SECURITY.md. The company served so much unnecessary data on their API that I now have Steve Nash's personal cell number, among others, before they designed their front page.
There's a gold rush going on but this really should be a hedge. At some point the market correction will screw over a ton of people.
It's basically an offshoot of the same appeal of crypto/NFTs but you get something to look at, I guess, and the grading companies make good money off of it.
A quick google says 320 billion in 2025 and is projected to grow to over $535 billion by 2033. I didn't know it was that big but it makes sense. Gamestop has been all in in collectibles and eBay has a huge market on it as well. I think this is the play. Both companies being profitable doesn't make it a bad deal for the number one collectibles company in the world.
I have followed from side and it feels like NFT craze hot. With some parts like Pokemon cards being insanity with regular fights, people hiding in stores and so on.
It is a multi billion dollar market with Ebay being key secondary market with Gamestop angling for same.
I learned to programmed BASIC on paper long before I owned a computer. I knew I was going to get one though.
With the state ebay is in, I'd welcome anyone else to run it
I know what you mean, but I highly suspect there's room for it to get worse.
eBay is too easy to take for granted if you've never tried buying or selling things on FB Marketplace or Craigslist. Having people over the internet trade things with minimal middleman is a really hard problem, and someone will always get scammed somewhere.
If they can do some accounting trickery to pull this off then they deserve it. Makes zero sense to me but I did not think GameStop had even close to that in assets.
It's the leveraged buyout playbook. You buy a company and use its own assets to secure a loan. Then you "find efficiencies" (strip it for parts to pay yourself and the creditors).
In this case, if the deal goes through at the price given, eBay's liquid assets are untouched. The cash portion is paid out entirely through the loan and Gamestop's cash.
> $20 billion in debt financing
This debt will carried by company resulting from merge. It might be not classic leveraged buyout but if they have any trouble with repaying it, it will end in asset liquidation all the same.
That's true. But they also have a $6 billion cash cushion to try to service that debt.
If they can do it, then I can do it. Why not? Making the same bid with made up money
Do you have 9 billion in cash? Or are you as clueless as others about Gamestop from 2022 on?
https://archive.ph/CeCxv
Everyone is taking this too far at face value. The purpose of this announcement is to pump GME stock.
Well it doesn't seem to be working.
…how does GameStop have $55 billion?
There is no way that this deal will go through. However, it is good publicity stunt! Their offer is only 20% above the current share price, and they don't have nearly enough funding to complete the transaction. I would love to know what rate TD Securities is willing to lend? What would be the spread over 3month USD LIBOR? I assume 300-500 bps.
"I like the stock" - GameStop
They're gonna have to sell ALOT of their NFT power packs
when i saw this headline i expected it to be the other way around
Seems like a sign of the apocalypse.
I've been with eBay since 2006 and have been consistently disappointed with their consistent failure to innovate. They need some inspired leadership.
I was seeing the news about this calling it GameStop eBay takeover and I assumed it was eBay buying GameStop and I was like, huh that doesn't really make sense for eBay to buy GameStop but maybe they want the physical locations?
How the hell can GameStop buy eBay, this is insane.
The other way around made more sense to me as well. I don't see this going well for eBay, but I also don't entirely know how well their business is doing.
Here local eBay "clones" aren't in a good place and have been left as ghost towns after Facebook Marketplace.
I was just thinking how nice it was to still get used stuff on eBay and now Mr. McMemeStock is going to kill it to extract a few billion for himself.
Yay.
GameStop is going to acquire BestBuy
From storytelling to investor POV, does it a good story to frame this as entering the AI era through a digital service that everyone familiar with?
Wonder what Shkreli thinks of this.
Can we please not? eBay is one of the few places I still enjoy on the web.
Your move, Jamie
Every day our world is becoming just that tiny little bit more stupid
Not true, on many days it becomes enormously more stupid.
Are there still large shorts on GameStop? If this goes through I assume it will wipe those out?
No. Short interest is at 15% and cost to borrow is .36%.
Shocked that they didn't just offer eBay $2 like they did for literally everything I brought to trade in.
>55.5B
Is this offer on a timer?
Famous grifter Ryan Cohen is back in business. Time to collect more money from reddit
Why not? They haven’t left him even as he’s done little but dilute them to stockpile cash.
Diamond hands?
Great discussion. Curious what others think about the intersection of productivity and browser tooling here.
How the fuck such a thing could happen in a sane world?
Anyone can offer to buy a business, I'm sending in a competing offer based on my internal valuation of my Schrute Buck holdings.
Is eBay just a hive of scams now? Try searching for a Mac Studio with 512gb of RAM for example. I know it's a highly sought after item, but there are so many sellers with 0 reviews supposedly selling these at suspiciously low prices. What's going on here?
I bought some dope weight lifting shoes last week. 46 bucks after shipping, 175 new. I’m pretty stoked on that. I was looking for a 3090 recently too and i did see the 0 rep sellers with buy it nows 10% under market value. That was a little sus. Nonetheless https://www.ebay.com/help/policies/ebay-money-back-guarantee... is a thing?
Same thing if you search for a PS5 Pro. And I have no idea how these aren’t taken down.
Reminds me of Sierra On-Line being acquired by CUCk International in 1996.
That was a sad story. Al Lowe talked about it a couple of years ago on a German podcast.
Please someone block this, they are going to ruin eBay.
ebay cant get too much worse.
Is it just me being ignorant and crazy, or does it make more sense for EBay to take over Gamestop, rather than vice versa?
is this for real? Or just to get gamestonks back into the news for another whirl on the wheel of meme?
They have managed to raise lot of money and don't have any proper ideas what to use it for. So this might not be worst possible way.
“Half cash, half stock.”
The sad thing is it could succeed. This is exactly how Putin put the apparatuses of Russia into the hands of his allies. I'm sure GME will get administration support, any white knights will get Netflix treatment from the FTC. Cohen, as a loyal MAGA supporter, would then use Ebay cash to support Trump aligned groups.
The Gamestop CEO is an interesting character, he grew Chewy and sold it, did a massive play on Apple stock during the pandemic and used that to buy a 9% stake in Gamestop over time, rode the hype to accumulate $9B while turning the company around and closing stores that weren't profitable and making it a money making budiness again. And now they already own 5% of eBay on top.
Along the way he says some ridiculous Trump stuff and wasted a bunch of time on NFTs but the eBay play seems interesting at least. It's one of the best internet soap operas to follow. For comparison AMC was put in the same "meme stock" bag at the time and you can see how they managed to ride the hype. So it's not just memes.
I look forward to today's Money Stuff!
> turning the company around
The revenue for Gamestop continues to decline, even if they are "profitable". The annual decrease in revenue continues. It's a dying business, it hasn't been turned around. The most charitable comment you can make about the company is that they've shrunk the business to align with their revenue decline.
https://stockanalysis.com/stocks/gme/revenue/
What about the company's profitability? Did that continue to decline as well?
He's a meme trader manipulating retailer investors, following Elon's footsteps
I mean he pumped and dumped BBB, and those people (or should we call them apes?) still love this guy.
those guys have a very strong track record of getting their way lately
ebay is still "old internet", and genuinely useful and well built. enshittification is incoming...
Have you used eBay in the last few years? It's awful for sellers and awful for buyers. This is coming from somebody who buys on eBay twice a month on average.
What would make it better? My only complaint as a seller is fees. I have no complaints as a buyer.
The best part is eBay works exactly the same as 10 years ago, as far as I can tell.
I try not to use it and then something will come up and I use it. Could be my market, or who knows what but there seems to be more scams.
It’s the only place someone can give you a fake tracking number (somehow people get these from UPS) get caught and other than a refund after weeks and a negative reputation ding, they get to keep on doing it. The fake tracking number scam has been going on for years too, it’s still happening. Permanently ban for people caught doing this, preferred shippers with eBay as a managed tracker or something like that.
I have never had this happen, but I don't buy from first-time eBay sellers. There are definitely scams on there, but they seem to be "too good to be true" prices with 0 reviews on the seller.
Surely you're not getting scammed by sellers with lots of reputational history?
I actually am more nervous as a seller, as their buyer protection almost always sides with buyers, at least in the US (and the fee is astronomical.)
Well, a month ago was my last use for about a year. A user with a 96% positive feedback and definitely a lot of sales slow played and then issued a fake UPS tracking number. The negatives in their history sounded mostly like communication issues so I assumed they were okay. They sell a lot of things in the $30-$90 range, this was a $200 item they had listed for $145, and they supposedly had a couple of them. A local store ran a sale around the same time that has it at $150 so it wasn't crazy. Upon deeper inspection of their reputation once things got fishy, they have 150+ sales, 4 negatives, 1 neutral. There are real looking positive feedbacks but about half are automated positive feedbacks. Not sure entirely what that means.
A refund has been granted but ebay's computers show that someone in my zipcode has also recieved a package (mine should have been 20lbs, the one sent was 2lbs and received by someone with a different name) so I'm kind of expecting a little more drama before it's all said and done. To be fully transparent, it was marked shipped without tracking and has an estimated arrival date of 10 days; after 10 days I asked if it had shipped and was told no and offered a refund and then it became marked shipped with a fake tracking number and "was delivered." The short of it is they're a somewhat prolific seller, I can't think of any reason it issue a fake tracking number and they had my money for about a month. I'm getting the money back but I'm back to square one. The sale at the local store ended.. It's not that big of a deal, just annoying.
It seems like there are sort of 2 classifications of bad experiences. There are poor descriptions, slow transactions, shipping mix-ups, mis-communications and things of that nature. A reputation ding is probably appropriate. Then there are more fraudulent things and ebay has chosen to not really punish those things and let them go, same way Amazon will gladly list and sell fake goods.
That sounds incredibly frustrating, I'm sorry. Good luck.
As a seller, the buyer can claim that the package they received was empty or just had a brick or whatever, and eBay will almost always side with them. I have multiple friends who were been hit by this.
I use it more frequently than Amazon for used books and DVDs. It's cheaper and the sellers are often exactly the same.
It's not great for sellers either. I was banned during the time period before the Paypal divestment for having the galls to subpoena a nonpaying buyer's records. They take a cut from both sides. Sotheby's takes 10.5% (I think). eBay takes twice that for something comparable in value.
It’s still way better than Facebook marketplace. At least eBay mostly solved the scam issue. Zuckerberg seems to desire fraud on his platforms.
And yet, it's still the place to go to buy anything secondhand or used. I'd go so far as to say eBay could be nationalized under the Defense Production Act due to the critical role it plays in manufacturing by keeping obsolete manufacturing machines running.
For an old internet company they sure know how to enshittify global selling with their Global Shipping Program also know as Global Shitting Program.
GameStop is not a serious company and I can’t believe some people still buy in to their hype nonsense.
i don't understand why ebay looks SO terrible. It seems like some broken website where css failed to load.
Gamestop is one of the companies that I refuse to do business with. eBay is a company that I am reluctant about, but use anyway.
If this goes through, that will be the final straw that gets me to stop using eBay entirely. That would probably be for the best.
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Why do you refuse to do business with GameStop?
its a fun place to buy games though
How come?