Oh here's a beauty from tradfi finance land
At some point in early 2021 the mad scientists at GameStop Corp. realized, somewhat to their own chagrin, that their stock was going up quite a lot for reasons of its own. At first, they were terrified by this dark magic and declined to use it.
In Bitcoinland we're well aware of how this has played out... hashtag bitcoin paper summer... #1485116 printing fiat bad
...but printing shares goood #1291642
Go Figure This Fin-Engineering Bid:Go Figure This Fin-Engineering Bid:
So GameStop, a shell company with 9bn in cash and a legacy brick-and-mortar business nobody cares about, is bidding to take over eBay, with a current market cap of... checks notes... $46bn.
OK, EASY right... of course with the magic of money share printer, everything works!
in some arithmetic sense, GameStop could issue $28 billion of new stock. The stock closed at $26.53 on Friday; if you divide $28 billion by $26.53 you get about 1.05 billion. So if GameStop issued 1.05 billion more shares, that would cover the stock portion of the purchase price.
BUT, and this is (a version of) the kerfuffle NAKA bumped into in merging with BTC Inc. too,
a) printing a billion or so extra shares to buy ("buy") another company would significantly dilute shareholders, but more critically
b) GameStop doesn't have the shares!
can’t actually issue 1.05 billion more shares! [...] A company’s certificate of incorporation will normally authorize a large but finite number of shares, and the company can’t go around issuing more than that. In fact, GameStop has only 1 billion authorized common shares, and about 448 million are already outstanding, meaning that GameStop doesn’t have anywhere near enough authorized shares to pay $28 billion in stock for eBay. Oops!
They’d have to vote to approve the deal anyway, so getting more shares authorized is not impossible. Still it’s odd that it’s not even mentioned in the proposal. GameStop is offering to buy eBay for cash it doesn’t have, and also for stock it doesn’t have. One gets the sense that GameStop did not entirely think this through.
TL;DR,TL;DR,
in a sense this is just a YOLO/hail-Mary reverse merger... ebay shareholders will end up owning two-thirds of the combined entity, meaning it's not GameStop taking over eBay in any meaningful sense... but eBay taking over GameStop.
Should have bought (more) bitcoin when you had the chance
So, why isn't it eBay trying to buy GameStop?
I don't know. Could be fairly hostile, as in eBay board doesn't really want a merger?
Who else would be accepting the GameStop shares as payment?
Shareholders?
note: you forced me to do my homework... https://www.ft.com/content/31bfd02e-a02e-45fd-ad46-51544b1a3a8a?syn-25a6b1a6=1
it's just a bid for now, board is reviewing it (and to pass, they need a shareholder vote too).
In one sense, obviously, but also how would that work?
It's seems like it would be a huge pain in the ass to coordinate all those transactions with public shareholders, unless there are a small number of eBay whales who want to be compensated in massively diluted GameStop stock.
I must be misunderstanding your question. Are you wondering about the mechanics of hostile takeovers/bids...?
Symmetrically, eBay shareholders wouldn't "lose" what they have, they'd gain GameStop's assets and cash for some dilution
My question was only for a case that didn't involve going through the board.
ok, outline... doesn't make much sense then as a question, does it? like, what are we talking about
Thank you for the non-paywalled link! I'm really interested to see how the eBay thing works out. I've been using eBay for decades, with lots of complaints. I've seen how efficiently GameStop does business in their retail stores and I want to believe that they can improve the whole buying and selling experience, should the acquisition go through.
Or, if they do fuck it up, maybe things will get bad enough to where a better platform finds space to emerge (OpenBazaar rebirth?), and I'd be all for that too.
Reading about GameStop not having enough to cover their end of the deal, this story has become bizarre and entertaining.
indeed... when asked about it, the GameStop CEO said "we'll see what happens." https://www.ft.com/content/31bfd02e-a02e-45fd-ad46-51544b1a3a8a?syn-25a6b1a6=1
MAAN, we live in funny times