I’m amazed that GameStop has this much money.
Given that GameStop’s acquisition offer is half-stock, half-cash, they need to round up $27.75 billion; as they only had $9 billion in cash-on-hand as of January, most of that is the $20 billion in debt they’d be taking on.
They already have $5 billion in liabilities, so when also accounting for eBay’s $13.5 billion in liabilities, the combined company would have $38.5 billion in liabilities.
Not only would the combined company have negative shareholder equity after the $20 billion loan (about -$10 billion, given the current $10 billion in shareholder equity between the two companies), but their combined annual net income is only about $2.5 billion (theoretically $4.5 billion after the proposed cost-cutting; likely less however, given that shrinking the eBay marketing department will likely reduce sales), so it’s unclear how they intend to pay it off, aside from issuing additional shares that would dilute the investment of the very shareholders they are trying to convince.
I’m guessing they’re also betting on a revamp / to be more competitive with Amazon and that their diamond hand fans (I don’t know how else to describe them) will switch over to ebay in droves, they would.
Yes that’s my guess as well: the prospect of stealing even a fraction of the business that Amazon does would probably make the whole thing worth it, and to that end, the main thing eBay brings to the table is the kind of pre-established brand recognition that money can’t buy.
They are literally buying the brand recognition with money in this proposal.
Touché. However what I mean is that building a brand isn’t something that can be guaranteed simply by spending money. GameStop could spend several billion advertising themselves as an Amazon alternative and it still might not take. Whereas the eBay brand is well established. I suppose I should have said “the kind of brand recognition that money alone can’t build”.
“The proposal does not sound like a “terribly good offer” as it would saddle eBay with GameStop’s debt, said Sucharita Kodali, a retail analyst at research firm Forrester.”
Ah, there it is. Any time I’ve poked my head through the door of a Gamestop in the past 5 years it has been an empty ghost town mostly stocked with crappy funco pops.
Like Free-to-Play games and Casinos, they “make their real money” on whales. Go step foot in a Best-Buy; 95% of the time, the employee-to-customer-ratio is about 5-to-1, or worse.
To be clear, I think basing one’s business on that concept is delusional at-best, but its what a “profitable” retail chain has looked-like to share-holders for at least the last 30 years.
