Today's brew:
A press release pretending to be a deal, and Wall Street is too tired to play along.
Buckle up…
The Big Sip
The GameStop eBay takeover looks less like a deal and more like a pump in a press release.
On Sunday, Ryan Cohen offered $125 per share for eBay, valuing the company at $55.5 billion. GameStop is worth $12 billion. Add its cash and TD financing, and you reach $40 billion. You can do the rest of the maths.
It matters because we have seen this before. The credit reads "Ryan Cohen, 2021." And Bill Smead — whose fund is the sixth-biggest mutual fund holder of eBay — said the quiet part out loud on CNBC:
He is "wary of a potential pump-and-dump play."
The market is doing the analyst's eye-roll for her.
Here’s Your Brew
Bet one falls apart on a calculator.
CNBC's Andrew Ross Sorkin did the maths on air. GameStop's market cap is $11-12 billion. Cash on hand, $9 billion. The "highly confident letter" from TD Securities, another $20 billion. Total: $40 billion. The bid: $56 billion. Pressed on where the missing $16 billion comes from, Cohen said he didn't understand the question.
The audience laughed. The stock fell 10%.
Bet two is the synergies, which mostly aren't there.
Truist Securities sees no meaningful overlap. Bernstein's note was more direct: why disrupt a turnaround already working? eBay's share price is up more than 50% year-on-year. It just agreed, in February, to a $1.2 billion deal to acquire Depop to chase Gen Z.
Cohen wants to bolt Depop onto 1,600 US stores, best known for trading dusty Xbox controllers.
Then there's bet three, the one nobody puts in the press release.
Baird's Colin Sebastian called it the meme-multiple play: the hope being that a combined company gets the same retail-investor lift GameStop did in 2021. Cohen's not pitching shareholders.
He's pitching r/WallStreetBets.
None of which lets eBay off.
The company spent $2.4 billion on sales and marketing last year and added one million net buyers. eBay needs a knife.
Just not this one.
Two Sides, One Mug
Pro: eBay is spending $2.4 billion to add a rounding error of buyers — an activist with a knife is overdue.
Con: Cohen's currency is half stock the market is dumping, his synergies are vibes, and his shareholders are a subreddit.
Our read: This isn't M&A. It's a pitch deck looking for a stock chart.
Receipt of the Day
[Report] GameStop Corp. — "GameStop Proposes to Acquire eBay at $125.00 Per Share"
The proposal is "non-binding," funded by a "highly confident letter," and filed alongside a Schedule 13D.
Why it matters: "Non-binding" plus "highly confident" is corporate for "we'll see what sticks."
Spit Take
Cohen's bid is $16 billion short of its own price tag.
(CNBC)
Extra Curricular Coffee Break Links
CNBC — Analysts See Little Chance — Truist, Bernstein, Baird, Smead, all on the record. The rare Wall Street eye-roll.
Bloomberg — Inside the Financing — How $40 billion gets dressed up as $56 billion.
CNBC — Cohen's Squawk Box Interview — A masterclass in not answering the question.
Mugshot Poll 📊
What is this, really?
A real takeover attempt
A pump dressed up as one
An activist nudge to wake eBay's board
Cohen genuinely believes his own deck
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Enjoy your Tuesday, keep it caffeinated.
The press release lands.
The maths doesn't.
Read yesterday’s newsletter about Berkshire’s $397B cash pile here.
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