Can the meme stock king pull off audacious eBay swoop?

{"text":[[{"start":8.1,"text":"Ryan Cohen, the unpredictable king of the meme-stock era, has set his sights on his next project: a huge leveraged buyout. "}],[{"start":16.05,"text":"The GameStop chief executive is seeking to engineer a deal in which the shrinking video-game retailer buys online marketplace eBay for $56bn in cash and stock."}],[{"start":26.8,"text":"For Cohen, who made billions during the meme stock boom, pulling off the deal looks a tough ask. GameStop’s $11bn market capitalisation is a fraction of eBay’s and the financing required to get the deal done is far from secure. The gulf between the two companies is not just one of valuation, but also of stability and predictability."}],[{"start":48.5,"text":"But while the unconventional deal may appear a long shot, people who have dealt with GameStop’s boss say it is a “quintessential” Cohen move."}],[{"start":56.85,"text":"“Ryan is a bit of a cowboy, a guy that is hard to deal with, but he’s been pretty successful,” said a person who has done business with him."}],[{"start":65.1,"text":"Cohen made his fortune through the $3.4bn sale of online pet food retailer Chewy — which he co-founded in 2011 — to pet food chain PetSmart in 2017. "}],[{"start":null,"text":"

"}],[{"start":76.55,"text":"He bought a 10 per cent stake in GameStop and joined the retailer’s board in 2021. Within six months he was appointed chair with a brief to make a struggling bricks-and-mortar retailer fit for the digital age."}],[{"start":89.5,"text":"Cohen went on to gain notoriety by riding the pandemic-era meme stock wave, in which armies of retail traders sent stocks soaring and plunging on the basis of vibes rather than fundamentals. "}],[{"start":102.25,"text":"He recast GameStop as an ecommerce turnaround, hiring senior executives from Amazon to lend credibility and exploiting its surging share price to issue billions in new equity, capitalising on the exuberance of bedroom traders to strengthen its balance sheet."}],[{"start":117.45,"text":"Cohen is seeking to buy eBay, in which GameStop has already built a 5 per cent stake, and position it as a credible rival to Amazon."}],[{"start":125.35000000000001,"text":"While the board of eBay has yet to officially comment, people close to the company have expressed serious concerns around the sources of funding as well as the industrial logic of combining with a much smaller company. "}],[{"start":139.70000000000002,"text":"Eric Talley, professor of law and business at Columbia Law School, said it was unusual for a “small kind of minnow company” to be “trying to eat the whale”. "}],[{"start":149.55,"text":"The lack of obvious synergies between companies that do not operate in the same industry made the deal “a bit of a head scratcher from a textbook perspective”, he added."}],[{"start":null,"text":""}],[{"start":158.45000000000002,"text":"Ebay remains one of the largest global online marketplaces, but it has long been seen as a laggard in innovation compared with Amazon and newer ecommerce platforms such as Vinted."}],[{"start":169.35000000000002,"text":"GameStop, for its part, has struggled to define a post-meme craze identity. Combining the two companies could, Cohen’s logic goes, create a platform with both scale and a revitalised retail investor base."}],[{"start":182.65000000000003,"text":"The maths behind the deal sets up a steep challenge for GameStop. Cohen has access to almost $40bn of funding — comprised of a $20bn financing commitment from TD Bank, roughly $9bn cash on GameStop’s balance sheet and $10.7bn worth of GameStop stock."}],[{"start":202.70000000000005,"text":"That leaves a financing gap of roughly $16bn to be filled, most likely through additional stock issuance. "}],[{"start":210.30000000000004,"text":"In normal circumstances that kind of gap would be prohibitive — but GameStop is not a normal stock. Its investor base has in the past shown a willingness to support management through highly unconventional capital raises."}],[{"start":225.30000000000004,"text":"“I can kind of see the investment thesis, but it involves such a huge upfront financial commitment from GameStop that you have to assume there’s a degree of reliance on meme stock boosts,” said Ann Lipton, a law professor at the University of Colorado. “So far, those don’t seem to be materialising. So I’m sceptical they can pull it off,” she added."}],[{"start":246.10000000000005,"text":"Michael Burry, the “Big Short” investor who gained notoriety from his bet against the US housing market ahead of the 2008 financial crisis, had until recently been one of Cohen’s more prominent supporters."}],[{"start":258.45000000000005,"text":"But that position has abruptly changed. On Monday Burry said he was likely to sell his stake in GameStop partly as a response to Cohen’s decision to go all in on eBay, a deal he perceives as too big and loaded with risk."}],[{"start":271.35,"text":"“If GameStop wants to do it with billions of interest expense and all manner of covenants restricting its movements, it will not be breaking new ground,” he said on his blog. “It will be trotting in well-worn ruts on the road to capitalist hell.”"}],[{"start":286.1,"text":"Cohen had a chance to make his pitch to investors on Monday during an interview on CNBC, but he ended up sparring with the hosts while offering little detail on financing."}],[{"start":296.8,"text":"His performance immediately became a meme. Cohen’s supporters took to social media to accuse the mainstream media of a “hit job”. "}],[{"start":305.55,"text":"But while the odds may look stacked against him, the person who has worked closely with Cohen cautioned that it would be a mistake to bet against a cowboy investor with “nothing to lose”."}],[{"start":323.3,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777988714_9910.mp3"}