BlackSw⏻n

$GME... Given how many are posting, but without a clear discussion of the deal dynamics, I thought I'd lay it out with commentary to help my peeps. Deal commentary and a walk-through on the terms. 1) $GME & $EBAY make sense merged? There's been a few folks suggesting the answer is yes b/c of a monopoly on the collectables biz. And a lot of so-called FinXprts that suggest it doesn't. But might I suggest that neither is focusing on what likely matters the most? And by this I mean, what is the question that actually matters? That question is this: Do the board & shareholders prefer the current eBay strategy and CEO or would they prefer a payout plus Ryan Cohen as the new CEO? It's actually as simple as that. Now it's possible I just don't get all the $GME stuff, but I have not seen a thoughtful discussion on this. IMO it would include a discussion of these facets of Mr. Cohen: a) Acknowledgement that Ryan is a boss with specific expertise in retail, namely Chewy, which he sold for $3.3b when he was only 32. He's only 40 now. b) Ryan is a Canadian billionaire who knows how to raise capital, so this question of whether a Canadian bank will give him the money he needs is kinda crazy to me. (*sorry CNBC... ya gotta know...) c) $EBAY is on year 6 of it's turnaround. It hasn't been bad, but it hasn't been so great that they are clearly out of the woods. And year 7 is usually when the board "thinks about it." as does the CEO for that matter. I mean, $EBAY was a hot mess when Jamie Ianone came in. He's got a lot of what he wanted done. It might be a shocker, but it's also possible he's all good to take the W on where $Ebay's gotten to and move out. It's not like he won't get paid on that (IDK, maybe faster equitizatin of the options?) And in my opinion there are somethings Ryan might do that would the board would like and would take a page out of chewy, namely figuring out a way to create a SASS revenue stream within Ebay. 2) Is dilution inevitable? Yes... but the way to think about it is not how it's being spun. It's not like you're getting diluted to be diluted. You end up being eBay + GME afterward. but let's break that apart Part A: What is this structure? The offer is a 50% cash, 50% stock reverse-merger of $GME the smaller company into $EBAY the larger company. These don't happen that often, but I think it's ok to call it a Levered Strategic Merger with a Financing Bridge. TD is offering a bridge loan. Hence, they would be looking at debt coverage or specifically: a) How much cash do you have b) How much is your stock worth (the 50% stock portion of the deal + any dilution) c) What is your combined EBITDA. d) Is the leverage created in doing this out of control (aka over 4x). If the deal is being done with a take-out price of $56b ($125 x 450m shares outstanding), then: stock: $28b cash: $28b Part B: Just the stock component $GME only has $12b in market cap. At current, the amount of dilution will be 100% related to how the stock performs. He's going to have to issue share sto take in Ebay so technically, yeah, you the $GME stock holder will have less % ownership. HOWEVER, it's not like normal dilution, where all that happens is that you give $GME cash. Here, you get Ebay, a cash-flowing company. And if $GME wasn't so freaked out about this deal, the shareholders might even consider gaming this and bidding up so the dilution was less acute. Part C: Just the Cash Component TD is providing the bridge financing. Their viewpoint is this: a) Combined EBITDA: $4-5b ($eBay $3.5-4b, $GME $0.5-1B) b) Cash: $12b ($Ebay 3b, $GME $9b) c) EV: $65b ($EBAY has $13b in debt) d) Funding Gap: $28b - $12b = $15-16b Funding Gap e) Debt load: $3b + $16b = $19b total debt post deal. THEREFORE, a) Debt/Ebitda (Conservative case) = $19/$4 = or 4.75x This is in the strike zone for large levered deals. Unambiguous would be sub 4x, but 4-5x isn't crazy. 3) Are You Going to Participate? No. This is a lot of brain damage. But if I were a diamond-handed $GME shareholder, maybe you ride along. I mean, Ryan is not a talker. He's a doer. There's probably board politics, who knows what the stock will do to either assist or scerw up the deal term dynamics. Conclusion: There's probably layers to this... But for those struggling to understand what was going on... I think this covers some of the major points I'm seeing presented confusingly. That's all I got on $GME for now....Happy Monday, and if you got this far, a little PSA Reminder: Mother's Day is Sunday in the Americas (Already happened for the Brits). Don't forget to get Momma something. Feel free to post what you bought/made/are doing so the folks who haven't got that sorted yet can get a little help.