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GameStop CEO Ryan Cohen is courting GCC sovereign wealth funds (SWFs) to bridge the equity gap in his USD 55.5 bn unsolicited takeover bid for eBay, the Wall Street Journal reports. GameStop, a meme stock and the world’s largest video game retailer, already owns around 5% of the legacy marketplace platform — which trades at roughly 4x its market cap. Both the buyer and the target are listed on Nasdaq.
A case of big eats… bigger? This reverse-scale acquisition will need a massive third-party equity injection to cross the finish line, which Cohen is turning to our part of the world to find. The structure also includes USD 9.4 bn from GameStop’s own coffers and a USD 20 bn debt commitment from Toronto-based investment bank TD Securities, leaving some USD 26.1 bn to be filled by SWF equity.
It’s not a shot in the dark. GCC SWFs love playing equity bridge for marquee Western take-privates. The hunt for regional capital tracks with the Public Investment Fund’s (PIF) record USD 55 bn leveraged buyout of Electronic Arts and its minority position in Nintendo through its gaming arm, Savvy Games Group.
How the bid stacks up: At USD 125 per share, the 50-50 cash-and-stock offer represents a 20% premium to eBay’s close on Friday and a 46% premium to its closing price in early February, CNBC reports.
The logic? eBay is bloated and undervalued. “EBay should be worth — and will be worth — a lot more money,” Cohen, who sits on a meme-era cashpile, told WSJ, adding that he wants to make it the “legit competitor to Amazon.”
What’s next: eBay’s board has to respond. If it rejects the offer, Cohen said he’s prepared for a hostile proxy fight.
Pundits are skeptical: “Though the companies overlap in collectibles and resale, we see low probability of an [agreement],” according to Bloomberg Intelligence analysts Poonam Goyal and Sydney Goodman. Bernstein analysts separately wrote that they “see real challenges to structuring this [agreement].”
Market reax: eBay popped as much as 13.4% in after-hours trading to USD 118, but still traded well below offer, suggesting the market isn’t fully buying the takeover. GameStop, meanwhile, added roughly 4% to USD 27.6.
MARKETS THIS MORNING-
Markets in Japan, Korea, and mainland China are closed today in observance of holidays. When they open, we’ll be closely watching how investors react to renewed tension in the Middle East. It remains unclear how US equities will open with futures flat.
|
TASI |
11,091 |
-0.9% (YTD: +5.7%) |
|
|
MSCI Tadawul 30 |
1,476 |
-1.2% (YTD: +6.4%) |
|
|
NomuC |
22,807 |
-0.6% (YTD: -2.1%) |
|
|
USD : SAR (SAMA) |
USD 3.75 Sell |
USD 3.75 Buy |
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Interest rates |
4.25% repo |
3.75% reverse repo |
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EGX30 |
51,974 |
-0.7% (YTD: +24.3%) |
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ADX |
9,821 |
+0.3% (YTD: -1.7%) |
|
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DFM |
5,780 |
+0.2% (YTD: -4.4%) |
|
|
S&P 500 |
7,201 |
-0.4% (YTD: +5.2%) |
|
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FTSE 100 |
10,364 |
-0.1% (YTD: +4.4%) |
|
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Euro Stoxx 50 |
5,764 |
-2.0% (YTD: -0.6%) |
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Brent crude |
USD 113.80 |
-0.6% |
|
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Natural gas (Nymex) |
USD 2.85 |
-0.6% |
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Gold |
USD 4,530 |
-0.1% |
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BTC |
USD 79,978 |
+1.8% (YTD: -8.7%) |
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Sukuk/bond market index |
914.97 |
-0.2% (YTD: -0.5%) |
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S&P MENA Bond & Sukuk |
151.40 |
+0.1% (YTD: -0.3%) |
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VIX (Volatility Index) |
18.29 |
+7.7% (YTD: +22.3%) |
THE CLOSING BELL: TADAWUL-
The TASI fell 0.9% yesterday on turnover of SAR 6.1 bn. The index is up 5.7% YTD.
In the green: Al Sagr Cooperative Ins. (+10.0%), Amana Cooperative Ins. (+10.0%), and Saudi Enaya Cooperative Ins. (+6.7%).
In the red: Middle East Healthcare (-7.3%), Nofoth Food Products (-7.3%), and Al Majed Oud (-6.6%).
THE CLOSING BELL: NOMU-
The NomuC fell 0.6% yesterday on turnover of SAR 20.9 mn. The index is down 2.1% YTD.
In the green: Digital Research Co. (+16.9%), Mayar Holding (+6.9%), and Marble Design (+6.2%).
In the red: Leaf Global Environmental Services (-8.7%), National Signage Industrial (-7.0%), and Taqat Mineral Trading (-7.0%).
