EBAY Fundamentals & Value If GameStop Acquires Them!

追加: 2026-05-12

[00:00:01]Master your money, free your future.

[00:00:03]Welcome to Budget for Life. My name is Jeremy. I'm not a professional YouTuber.

[00:00:06]I'm a financial adviser. But this video is not financial advice. In this video, we are going to break down eBay's financials. Going to look for whatever we can find. What is Ryan Cohen interested in doing? And we're really going to look against what he says he is going to do if GameStop acquires eBay.

[00:00:27]How likely are those milestones um in terms of a one-year ability to achieve them? And what could happen to the top line of eBay's uh sales and revenue if he does indeed go through with this aggressive cost cutting? How then do you think about an eBay valuation? We'll see how far we can get into it in this video. Uh but I'm excited to learn what we can learn. That said, also want to say thank you to those who have subscribed to the channel. Thank you also for the likes and comments. We're scaling Mount Fuji together. 3776 is the target. If you want to be a part of the Pokey sub club, there is now less than 300 spots left to be a part of it. Also wanted to say thank you to fans and friends of the channel who want access to the best GameStop spreadsheet in the world. So, at a high level, a couple of things stand out when analyzing eBay's financials.

[00:01:26]Starting on the balance sheet, you can see 2025, 2024, and here you have 2023, and 2022.

[00:01:36]Their total assets um four years ago were at 20.8 billion.

[00:01:42]Today, are at 17.6 billion.

[00:01:47]The main um cause for that is this equity investment in a company that I don't even know how to pronounce, Adventa, right? The equity value of that grew to over 4 billion and then they ultimately sold that investment and rolled some of that sale into other long-term investments. You see their long-term investments in 2022, otherwise got all the way down to 1.1 billion in 23, now back up to 2.7 billion at the end of fiscal 2025.

[00:02:27]So, some of that sale of this current asset uh went to other investments, but most of it went to debt payoff, which you will see here. So their total liabilities historically or in 22 and 23 over 15 billion more recently in 204 and 25 now down to just under 13 billion in total liabilities. Most of that being long-term and short-term debt, which currently is at 750 million of short-term debt, about 6 billion in long-term. a few years ago was at 1.1 billion in short-term debt and almost 8 billion in long-term. So, they invested in a venture. The venture paid off well.

[00:03:25]They used those earnings to pay down debt and bolster their other long-term investments. Overall, that's a nice change in balance sheet. But there's one key problem here, which is that that is a result of something that has nothing to do with eBay's fundamental performance. So, I'm glad that they invested in a startup. Can they historically continue like can they continue to invest in high upside startups that move the needle for their balance sheet to utilize their cash? Maybe. We'll see.

[00:04:08]They are in Silicon Valley, so I'm sure they have an edge up opportunity to at least hear about um those types of firms, but that's not really fundamentally a part of how you would value eBay.

[00:04:23]eBay is not getting valued as, oh man, this is an amazing private equity firm.

[00:04:28]This is an amazing VC group. They have an amazing amount of capital that they can invest relative to their market cap.

[00:04:35]Look, their market cap's almost 50 billion. And we're talking about currently they have a total of five billion in current assets.

[00:04:47]If you put their cash and cash equivalents and their short-term investments together, that gets you to about 2.8 billion. You add in their long-term investments, most of which are probably not immediately uh liquid, although a lot of them probably are T-Bill related. All that to say, it's basically 5.5 billion in investment assets, but not all of that 5.5 is able to be invested. Some of it already is invested, some of it needs to be held in cash, etc. All in all, a current, you know, asset to debt ratio of 17 to 13 is fine. It's not amazing, but it's fine. Their net cash is actually about negative1 billion and a huge portion of their current assets is this 4.4 billion in goodwill which is an asset attached to basically premium that they paid over the years for different companies they've acquired. So, eBay has maintained its balance sheet through investments it's made and maintained a favorable asset value and its market share in the peer-to-peer/resale space through purchasing other companies. That's where you see that goodwill come about. When you look at just the bare bones liabilities versus, you know, cash and cash equivalents, they're actually net cash negative. and even their total assets to total liabilities. If you net out their goodwill, which obviously the, you know, liquidation value of goodwill is is substantially low, you're looking at basically a a one one assets to liabilities. Nothing incredibly impressive.

[00:06:50]The the simplest way I could say it is that they have maintained their balance sheet for four years. It's not looking any better really. It's It's looking the same. And a lot of that maintenance is on the backs of investments that are unrelated to the fundamental performance of eBay. Compare that quickly to GameStop's balance sheet, which four years ago we were looking at, you know, around 1.2 2 billion in cash and and securities and uh total liabilities of almost 2 billion.

[00:07:29]Today you are looking at cash and securities of over 9 billion and total liabilities now over five but operating liabilities is actually just over 750 million. the rest of those liabilities being convertible bonds which also uh bolster the cash position. If you wanted to net out that impact, you could simply look at stockholders equity net of the convertibles. You're at 5.4 billion in book value for GameStop at the end of fiscal 2025 compared to four years ago. you were looking at a stockholders equity a book value of 1.3 billion. So GameStop's balance sheet, another way you could say it is it's four times more valuable now than it was four years ago. Stockholders equity has grown by 4x over the period where eBay's has basically stayed the same and GameStop's growth has come from its own fundamental performance.

[00:08:41]whereas eBay treading water has actually been through other investments and equity and purchases of of of competitors that they've needed to do just to maintain their space. So if you net that out, eBay would look even less impressive relative to GameStops. Let's look at their income statement because part of the question is why does Cohen want this?

[00:09:14]What what are the trends as it relates to eBay? How durable is eBay really? In 2021 they were doing 10.4 billion in sales and over two years that declined.

[00:09:29]Over three years that declined and in fiscal 2025 they finally saw a bump to 11.1 billion. So a 4-year topline that's basically stagnant. But if you were to take that 700 over that 104 that you started with, you're at less than a 7% growth in revenue over four years. And again, they've acquired businesses over this period, too. The costs of those revenues, which you'll see in the gross profit numbers, right? Gross profit was almost 8 billion in 2021, recovered to almost 8 billion in 2025, but was at closer to 7 billion for 2024, 2023, and 2022.

[00:10:24]What does that mean? Gross profit has stayed the same.

[00:10:28]It has stayed the same from 2021 through 2025. And by the way, what is the recovery in 2025? What has eBay done that has finally moved the needle at least a little bit on the top line and at least a little bit in terms of gross profit despite right cost of revenue up to 3.1 billion in 2025 which is about what is that a 20% growth 20% increase in costs from 2021 to Now, the the needle mover in the positive direction for eBay in 2025 has been collectibles.

[00:11:17]And that in some ways is not totally because of, but it's aided by GameStop. GameStop has helped to increase the popularity of graded cards by making it more accessible for more people to get cards graded and to exchange graded cards for economic value. And eBay's been riding that same trend. All that to say, that's a space that's growing fast. eBay is in a nice position relative to the collectibles industry. But outside of that secular trend, eBay has not done anything else to meaningfully grow revenue or meaningfully grow margins aka gross profit. Now, think about that compared to GameStop again for example.

[00:12:16]So, GameStop over the past four years, their sales have gone down from 6 billion all the way to 3.6 billion in 2025.

[00:12:31]Now that said, their store count, so about a 40% maybe even a 45% uh really more like 40% drop in topline revenue over the past four years for GME, which has been the the lynch pin in the bare case for this 4-year period for GME. When you look though at sales per store, you know, four years ago they were at 1.3 uh million in sales per store and today or in 2025 they were at 1.48.

[00:13:15]So, their sales per store have actually grown by a decent amount, actually, $170,000 a year, divided by the 1.3 they were doing before. Sales per store over the past four years have grown 13% for GME despite their total store count now at just over 2,000 stores compared to where it was literally double that.

[00:13:50]All that to say on the top line, GameStop has actually in comparable sales has actually grown top line better than eBay has over the past four to five years. Now look at margins.

[00:14:08]GameStop's margins and therefore their gross profit went from 22% margins at a 1.3 billion gross profit to now 33% margins and still 1.1 million or sorry 1.2 billion really in gross profit. So gross profit again suffering a bit due to topline coming down by 40%.

[00:14:38]But the the margin has improved substantially, meaning that they have actually made about the same amount of money in dollar figures in 2025 as they did back in 2021 when they were more than what se 60% larger in store count than they than they are now. Right now they're at 2200 or 100% larger. They had 4,500 stores.

[00:15:13]Now they have 2,200 stores. Yet in dollar terms they're doing about the same amount of gross profit as they were when they had twice the scale. Double the store count, the same gross profit.

[00:15:29]What is the difference? Gross margin improvement. eBay's gross margin is in 2025 was 71%.

[00:15:45]In 2021, let's see here, was 75%.

[00:15:56]So, eBay's margins have indeed shrunk over the past four years. GameStop's margins are 50% higher than they were four years ago.

[00:16:11]Now, let's look at SGNA.

[00:16:14]eBay, and by the way, this is what Cohen's focused on is SGNA. Cohen hasn't said anything so anything with numbers attached to it about an ability to raise the top line for eBay. He has also not made any promises about his ability to improve margins and therefore gross profit for eBay. But could he find a way to raise revenue?

[00:16:47]He certainly is interested in it. He's talked about live commerce, for example.

[00:16:50]I've talked about the digitization of and really the gamification of retail being something that he's interested in.

[00:16:59]Obviously, the collectibles kind of secular tailwind working in eBay's favor. Could topline revenue grow with GameStop stores being drop off points for new sellers to onboard to the program? Certainly possible. Could Cohen find ways to cut these costs of revenues to increase margins? Well, again, he's increased margins for GameStop by 50%.

[00:17:27]right from from 22 to 33.

[00:17:32]So that I would be led to believe that some of this 3.1 billion in cost of revenue Cohen can find a way to cut which would increase their margins before we even get to the SGNA conversation.

[00:17:52]How much can they increase margins?

[00:17:53]probably not by 50%. But an X factor when you think about how do you ultimately value what could be a GameStop investment and acquisition of eBay. But let's look at eBay's operating expenses over these past four years, 5 years.

[00:18:12]In 2021, their total operating expenses were 4.8 billion, giving them an income from operations of 2.9 billion.

[00:18:23]Income from operations dipped significantly in the following years and even today is at a 2.2 billion while operating expenses have grown to 5.6 billion. Look at that. Operating expenses have grown by $800 million since 2021.

[00:18:46]and income has shrunk by $700 million because they're doing the same gross profit as they were doing 5 years ago, which by the way, they were really doing less than, but they they've kind of been bailed out this most recent year from the collectibles secular trend.

[00:19:10]Where is that $800 million in extra spending happening?

[00:19:17]Well, sales and marketing expenses from 2.2 up to 2.4, there's 200 million of it.

[00:19:27]SGNA from 900 million to 1.2. So, there's 300 million of it. And then the rest is product development going from 1.3 to 1.6 billion.

[00:19:48]$800 million in added expenses.

[00:19:53]And again, by the way, $500 million in added cost of revenue for a total of 1.3 billion in additional costs to the business.

[00:20:09]And ultimately you're left with an income that has shrunk despite revenues while not growing. You could say they've they have been pretty stable. You could see why Cohen would describe this as a durable business because despite really nothing happening on the balance sheet of interest, they've used kind of any of their additional cash rather than strengthening the balance sheet. what eBay has done is buy back their stock.

[00:20:40]So they there's actually 20% fewer uh or 20% more shares of eBay in eBay's treasury.

[00:20:50]So they've taken um you know 10 million or so shares off of the open exchange over the past 5 years. But that's left their balance sheet looking just the same as it did 5 years ago. And their their income statement also could look just the same as it did 5 years ago, but actually looks a good amount worse because the cost of sales is growing is growing and the SGNA is growing across all fronts, right? from sales and marketing to product development to general and admin aka corporate, it's all growing faster than the stagnant revenue. So that's a little bit of intel on eBay's business. Now, when you think about eBay's valuation right now, they're trading at a 24p.

[00:21:50]And before GameStop got involved, they were trading at a 20p.

[00:21:55]Is there anything? And by the way, before the collectibles boom happened, they were trading at closer to a 10 PE.

[00:22:05]Again, their earnings has been basically the same this whole period. This whole 5-year period, their earnings have looked quite similar, right? 2 billion in net income in 2025, 2 billion in 2024, 2.7 in 2023, actually a loss in 2022, and a huge gain from nonoperating, right? Discontinued operations, things they sold off that inflated their numbers in 2021.

[00:22:40]But regardless, eBay in 20 fiscal 2023 did 2.7, you know, 25% more in net income than they did this past year. Those numbers would have come out around April 2024.

[00:22:58]And there you go. They go from a around a 40 a share number to around a 50 a share number after that comes out. But that was essentially the same PE, right? They didn't grow their multiple there.

[00:23:17]They just grew their share price because their earnings grew proportionally.

[00:23:21]Back in these days of trading sideways around 40, you were looking at a company that again was was probably closer to a 15 or a 10 PE. Collectibles blowing up brought it to a 20. GameStop bidding at a 125 a share has put it to a 25. When you think about valuation, how do you value eBay if GameStop owns it? Or just when you think about a fair valuation of eBay, can Cohen owning eBay move the needle from a price to earnings ratio basis?

[00:24:02]I don't see Cohen moving the needle on a PE basis in the near term as it relates to eBay. Just consider GameStop for example.

[00:24:15]Net of their cash value still trading at a single digits or teens type of PE ratio and has been for Cohen's duration.

[00:24:26]He has focused on improving the balance sheet. He has focused on improving margins. He has focused on improving topline efficiency, right? Sales per store. He has focused on cutting SGNA, which by the way, SGNA is currently at 900 million for the full year in 2025 compared to 1.7 billion in 2021. So, while eBay has grown SGNA by $800 million over this period, GameStop has shrunk SGNA by $800 million over this period. So, Cohen fundamentally has increased the value, the fundamental value of GameStop, but on a PE basis, the needle has yet to be moved, likely because people are waiting to see the top line get exciting. not just from an efficiency perspective but from a raw dollars perspective and as a result of course gross profit going up not just from an efficiency and a margins perspective but from a raw dollars perspective. So, when you think about eBay, GameStop owning it, what's the fair PE? It's probably, depending on how bullish or bearish you are on collectibles and eBay's position relative to that, you're probably still looking at around a 20p for eBay, which if that's how people valued it, you're paying about a close to a 30 PE if the deal goes through. Another 20% higher from here.

[00:26:04]What is that?

[00:26:07]About a 29 PE.

[00:26:10]You're looking at a 29 PE on the purchase for a company that fundamentally might be granted a 20p current fair value. Where does Cohen make up the difference? How do you go from um if you're GameStop, how do you create a rerating as they said in their 10K, they expect their acquisition to cause a rerating?

[00:26:42]It's not going to be on a multiple basis. It's going to be on the E.

[00:26:47]There's two ways to grow your market cap. One is to grow your multiple, which generally speaking is very conditional on growth rates. The other is to just grow the earnings and then even if you have the same multiple your share price goes up if your earnings are going up.

[00:27:07]How much can Cohen grow the earnings?

[00:27:11]He says in one year, just from SGNA cost cuts, he could increase operating income by over $3 per share or yeah on gap earnings per share for a what about 70% increase year-over-year.

[00:27:34]What is that? 7.79US 4.26 / 4.26 26 again 83% increase in earnings.

[00:27:45]That is also again without factoring in any change to revenue and also without factoring in any change to cost of revenue.

[00:27:58]Now I do think if Cohen comes in and slashes 1.2 billion from marketing that's probably going to affect the top line some.

[00:28:09]So then the question is, how much does GameStop's marketing, GameStop's store uh count and and network, right? How how much new revenue does that bring in to eBay?

[00:28:28]Even people being able to sell things to GameStop to get store credit at eBay, how much does that increase topline at eBay? Those increases will be incremental and they will be trying to make up the difference from whatever is lost with the 1.2 billion decline in marketing expenses.

[00:28:50]How much is the 1.2 billion in marketing really generating?

[00:28:56]Well, they did 2.2 in 2021 and had 10.4 billion in revenue. They increased that again by $200 million.

[00:29:11]And they do have 700 million and more in sales.

[00:29:16]However, again, you would expect most of that to be related to collectibles more so than an impressive marketing effort.

[00:29:27]And similarly, well, let's just finish the thought.

[00:29:33]The 500 million from S from general and admin, right, from the legal like firing people, corporate staff, how much do you expect that to hinder eBay's topline?

[00:29:49]I would say probably not very much at all. Right. the the quote unquote the overpaid executives or, you know, the thousands and thousands of employees that are hired, would Cohen just start firing people arbitrarily that have a clear demonstration of the value they provide to the business? Probably not.

[00:30:10]But he has for GameStop reduced headcount by I don't remember the number, but something like 60% or something like that. and their sales per store are higher now than ever, right? So, you wouldn't expect that 500 million to hurt the 300 million from product development would help in the near term. Of course, the question is just what are they developing?

[00:30:46]How valuable is it?

[00:30:49]and does that hurt eBay's competitive position in the future?

[00:30:55]Cohen obviously values product development. He sees eBay as somewhat of a techreated company because he's only projecting to go back to 2022 levels, right? It bumped up to 1.6 billion. He wants to bring it down to 1.3. He wants to spend $1.3 billion on product development every year. This isn't a category that he's looking to get rid of. This is a category that he values.

[00:31:27]He he does see the potential for competitive advantages to be gained through product development at eBay.

[00:31:38]It's not something that he wants to get rid of. It's something that he wants to trim. just just going back a couple years, he probably thinks eBay has overinvested in fancy AI related promises. And I think Cohen views eBay more as a bluecollar business than a tech business at the end of the day. And pro product development um is a priority for him, just not to the same extent that eBay has demonstrated over the past few years.

[00:32:06]All that to say that 300 million, does that affect eBay's topline near-term?

[00:32:15]No, probably not. Does it affect eBay's economic moat long-term?

[00:32:24]That's the question. How durable are eBay's sales if you cut their product development? And again, if we're talking about Cohen coming in and cutting costs, adding some efficiencies with the GameStop store fulfillment network, then you're thinking more or less that a price to earnings of 20 accommodates for the unknown of future income security.

[00:32:57]You're talking about a PE of 20 saying, "How much money can you make for me?"

[00:33:02]And if you cut product development, you know what? That's why you have a PE of 20. Now, if you if Cohen came in and said, "I'm going to triple product development." Now, you might project a multiple growth associated with that heavy investment into development, but Cohen is saying, "I'm not really optimizing for the multiple growth. I'm not optimizing for the ratio. I'm optimizing for the earnings." And if you're optimizing for the earnings, that means cutting some potentially high upside expenses and saying, "I'll just take the sure thing, which is the earnings. If that hurts me on the multiple because it adds a little bit of question mark to my ability to sustain our economic position, no problem. I think Cohen views his ability to sustain the economic position of eBay more so related to delighting the sellers on eBay and delighting the customers of eBay and the synergies that GameStop's corporate and store network already provide for eBay that eBay hasn't done yet before at least not at scale. I think that's where he views his competitive positions along with just the eBay brand and if he needed to increase product development expenses down the road, I'm sure that he would.

[00:34:27]So all that to say, that's 800 million that I don't think would really hurt on the top line and would really fall to the bottom line. The question is how fast can he do it? he, you know, they're saying they could do it in year one.

[00:34:45]Maybe that's finished, set up in year one, and realized in year two. I think that's quite possible, quite achievable.

[00:34:57]But you're still looking at a 2year amount of time before those cost savings are really seen on a backwards looking basis. one year to figure out where to cut the costs and to make those cost cuts and then another year to see how those cost cuts do ultimately impact the bottom line. The big question is the sales and marketing. Again, Cohen thinks through GameStop, through meme virality, through store network, through bringing new sellers, through live commerce, through collectibles continuing to grow.

[00:35:37]He thinks he can raise the bar for eBay's revenue, but cutting marketing will cut some of eBay's revenue.

[00:35:50]So, the question really is, how much do you think having sales and marketing impacts eBay's marketing or eBay's uh revenue, right? having their marketing expense, how much does that affect revenue? And then how much do you think GameStop running eBay adds to their revenue?

[00:36:18]That's the big question. And let's dive a little deeper into some more historical eBay 10Ks because I wonder if we have any added context for spending on marketing as it relates to revenue. So, here we go. In 21, 2020, 2019, their marketing back here was at a 1.8 billion with sales of 7.4 in 2019.

[00:37:02]their sales grow all the way to 10.4 in 2021.

[00:37:08]Is that a result of marketing going from 1.8 to 2.1 billion? probably not so much as it is COVID and people stuck at home and COVID checks, people having money to spend, increased speculation on collectibles, historical value, for example, things that would bring people to the eBay platform. Let's look even a bit deeper historically on marketing spend.

[00:37:41]See if we can learn anything else here.

[00:37:44]Did I already pass it?

[00:37:47]Oh no, there's item seven. Take me to item eight.

[00:37:56]Here we go.

[00:37:59]2018 176 revenue at 10.7 9.9 and 9.3 billion.

[00:38:11]sales and marketing 3.3 2.8 2.6.

[00:38:19]So again, 2016 to 2017 they spend about $200 million more dollars in marketing and they make about 700 million more dollars in revenue.

[00:38:32]17 to 18, they spend about $500 million more dollars in marketing and they get about $800 million more dollars in revenue. So you see a diminishing return there, but those 500 brought you 800.

[00:38:56]And what is for basically a 1.6 six uh topline compared to added marketing spend from 2017 to 2018. There's some type of critical mass that you're not really worried about them falling behind on 2018 to 2019. They see a huge dip in revenue, right? They were at 10.7 billion in revenue in 2018 and then they were lower still many years later.

[00:39:31]I mean, how long did it take them to get back to 10.7, just 2025?

[00:39:37]Revenue in 2025 barely higher than revenue in 2018.

[00:39:43]It's just pretty amazing to think about.

[00:39:47]and marketing as a percentage of revenue seems like it's been kind of all over the place.

[00:40:01]this marketing, let's see, 23 to 24, they spend hundred million more dollars in sales and marketing and their top line goes up by 170 million or Yeah. So again, about a 1.6 on the marginal marketing expenses. 24 to 25 is less about marketing expense, more about collectibles going crazy. All that to say, the risk on the top line of Cohen saying, "I'm going to cut sales and marketing by 1.2 billion," is basically that you lose 1.6 six times that in topline, which would be a $2.5 billion decline on the top line for eBay if top line comes down by 2.5 billion and gross profit as a percent of that write 79 divided by 71% of 2.5 billion, $1.7 billion decline in gross profit.

[00:41:30]You take that $1.7 billion decline and then you're saying, how much does GameStop owning eBay raise the bar? So, cutting 1.2 billion in marketing could lower gross profit by 1.7 billion.

[00:41:47]How much does GameStop owning eBay mitigate against that?

[00:41:51]That's really a great question.

[00:41:56]And to project it as anything extreme, I think is probably foolish.

[00:42:04]In year one, does GameStop owning eBay bring 500 million more to the top line? Again, very possible.

[00:42:15]very possible.

[00:42:17]So that 1.7 loss in gross profit if it's mitigated by let's just say even less let's say the GameStop 500 million is it costs a little bit more because people are bringing their items in store. So the cost of that revenue is going up. So they only clear 250 on the 500 that GameStop brings in.

[00:42:48]So GameStop owning eBay in one year approximately adds 250 million to gross profit but simultaneously cutting 1.2 billion might take away 1.75 billion in gross profit. You net those two together, gross profit coming down by 1.5 billion.

[00:43:16]Now, SGNA would be coming down by 2 billion.

[00:43:28]1.2 + 3 1.2 +.3 +.5 2 billion.

[00:43:36]top line coming down by 1.5 or gross profit I should say coming down by 1.5 SGNA going down by two would get you a $500 million increase to income in one year on a net income basis if you are at 2.5 billion instead of two billion, right? A 2 billion times the 20 PE gets you that $40 billion market cap, which is where eBay was prior to GameStop's involvement and prior to GameStop's involvement about how people would value eBay.

[00:44:29]If GameStop buys eBay, you could basically project a $2.5 billion earnings in, you know, one year out type time frame.

[00:44:44]Assuming that you lose a decent amount of revenue from like that's assuming you lose 1.6 six times the revenue from uh your marketing spend, which that's probably pretty conservative, but conservatively that 2 billion in net income turns to 2.5 billion in net income.

[00:45:10]So what does that mean? That means that if you're still valuing it at a 20p, you're looking at a $50 billion company instead of a $40 billion company.

[00:45:23]GameStop is paying 56 billion. Is a 10% upside from their one-year fair value uh a bad deal? know that would be a pretty good deal because you would assume they might be able to outperform the things that I said. Again, we're not even talking about any type of margin improvement yet. We're not talking about any added synergies with power packs yet. We're not talking about any any dramatic performance in terms of the combination of the company. You're looking at a $50 billion kind of current.

[00:46:03]how I think that a rational investor, most people in the market would value eBay.

[00:46:11]However, some people might not value it at that at that 50 right away. Some people might say, "Let me wait and see."

[00:46:21]And pretty quickly it could be 50, but I'm right now I'm just going to still value it at 40.

[00:46:27]or or maybe I'll give you the 2.5, but I'm only going to give you a a you know 18 or 17 multiple on it rather than a 20 because they're at there's added uncertainty when you change leadership.

[00:46:40]The immediate term fair value is not going to be higher than 56. The immediate term fair value is going to be lower than 56 because you have to pay a premium if you want to buy a company.

[00:46:57]outright. A publicly traded company especially.

[00:47:01]But to think about only a $6 billion premium on a one-year basis is pretty nice. What does this mean for GameStop? Right? Does GameStop owning eBay move the needle at all on GameStop side of the coin financially? Right. How much does GameStop sales grow up go uh go up? How much did their topline grow as it relates to owning eBay? And as a result, their dollar profit number, etc., how much incremental increase in SGNA happens. If GameStop owns eBay, they'll probably have to keep some of eBay's SGNA, which obviously they do expect to. They're they're cutting 500 million of 1.2 billion. So, GameStop saying that with our 900 plus 700 of yours, I think we're good.

[00:48:03]But are there any added synergies?

[00:48:06]You know, does it help GameStop side of SGNA? Are they able to lower their SGNA by more because of some of the assets and the talent that they would be acquiring through owning eBay? It's possible. It's definitely possible.

[00:48:21]All that to say, another big question is how much dilution happens of course when you're thinking about on a price per share basis the combined entity and how much debt is taken on when you think about the combined entity. But in raw kind of fair value terms, you are looking at a a GameStop that fair value at around 20.

[00:48:50]You're looking at a a company that is about to add 6.1 billion in net cash through the warrants and convertibles, but lose about 8 billion in net cash that they're spending on eBay. So, GameStop's, you know, kind of fair value from a net cash perspective, they're losing about two billion because they get six back.

[00:49:20]You know, right now they have 4.2 billion in long-term liabilities that would essentially be convertibles that have diluted. And they'd have 1.9 billion coming in from warrants that would have diluted. So net, you're only losing 2 billion in GameStop's market cap there, which right now their net cash is at a 5.4.

[00:49:49]If you lose two billion of that, then you're looking at 3.5.

[00:49:54]How much do you value GameStop the company when you're just looking at software, hardware, collectibles, and power packs, you're not looking at their asset management business. You are essentially looking at a fair value of something like 11 billion from estimations I've made, which you can watch in other videos, etc. But 11 billion for GameStop, the retail business, plus about 3.5 billion, just call it three in net cash post eBay purchase, right? Net cash minus 8 + 6 for a three 3 billion in net cash plus the 11 billion in weighted average fair value.

[00:51:17]Well, that's actually right at 115. It's 11466. So, let's take that 3.5, round that up to a 12 + 3, $15 billion for GameStop. You're looking at $15 billion fair value in my opinion for GameStop post eBay purchase. And then the question is, what's the fair value for eBay? And how does that impact GameStop in terms of my fair value for GameStop?

[00:51:46]Well, I'm saying conservatively, you're you're looking at cynically a $40 billion uh price target for eBay. I think more likely fair, like more descriptive of fair would be more like 50 billion in my opinion. Right now, the weighted average uh valuation that I put on GameStop's asset management business is 38 billion.

[00:52:13]So if they're at 40 and especially if they're at 50, they've actually net improved the valuation of their total company by owning eBay. And more importantly, they immediately become S&P 500 eligible, which of course adds potential buying pressure to the stock.

[00:52:35]And they might have a new ticker, which of course adds potential buying pressure to the stock, etc. If you're looking at a $15 billion GameStop plus a $50 billion eBay, you are looking at a $65 billion company.

[00:52:56]And that's being pretty conservative.

[00:52:58]Now, how much debt does that take versus how much dilution? That's the question, of course. the more cash that they pay, the fewer shares they have to issue, the more shares that they issue, the less cash they have to pay. So, how does a $65 billion valuation translate to dollars per share?

[00:53:23]That is to be determined on the final terms of the deal, to be determined on um how much cash they're able to access.

[00:53:35]What are the terms of that cash? Is that cash through convertibles? You would expect if they have to do a large amount of cash that there would be some convertible options with some of that cash. So even some of the cash could end up ultimately being dilutive.

[00:53:49]A lot of unknowns.

[00:53:51]But to take a company that right now I'd say fair value is about a 50 billion and say post eBay fair value conservatively right we went through the numbers here together is about a 65 billion and again that's not based on just arbitrary that's not based on multiples of assets under management but now it is based on a time-tested business that's very very durable which means that the market will actually appreciate this value whereas so far I have been um very much in the minority as far as an an investor an adviser that acknowledges the market value of GameStop's asset management business which so far has been in the spa stage and I I said months ago hey if if If this was a spa, this would be the most money any spa has ever raised in history. So, they're going to be able to acquire something pretty stinking impressive. Sure enough, they're going after a 40 plus billion dollar eBay through cost cutting even that of what eBay might lose on the top line. You're looking at probably a $50 billion fair value with added upside pending synergies with legacy GME. Where does 65 billion bring them on a per share basis?

[00:55:24]How much risk is added or how much cost is added related to increase in debt?

[00:55:29]Those are things that we will have to wait and see.

[00:55:33]But ultimately you're talking about going from 50 to 65 and for you know 40 to 50 of that 65 going from no one acknowledges it to everyone acknowledges it and then you add in the S&P 500 inclusion on the back end as well. Ultimately, I think it would be quite accreative for GameStop shareholders if they can pull off the eBay acquisition.

[00:56:04]What do you guys think? Anything you would add to the conversation? Would love to hear about it in the comments.

[00:56:10]We will dive deeper into modeling. What if it's all cash? What if it's all debt, right? How does this all get valued?

[00:56:19]How do you think about um equity strategies? How do you play this opportunity optimally based on different riskreward scenarios? We'll get into all of it. And then even longer term, right? What do you see as the potential for the valuation of the combined holding company? We'll get into all that soon. Hopefully, this was informative for you. If you learned something, drop a like. Again, consider joining the Poke Sub Club. Would love for you to be a part of it. That's all I got for you today. I will see you in the next