Whether the acquirer or target borrows the money, this would not allow to increase the market cap of the company. It would increase the enterprise value (because the debt allows you to make a bigger acquisition), but not the market cap.

>>> should-be-illegal process of putting debt on the acquired company's balance sheet

This is a basically a leveraged buyout (LBO). All private equity works this way. Yes, it should be illegal, or at least heavily limited.

I highly recommend this book: "Plunder: Private Equity’s Plan to Pillage America"

Taking a $20b loan from TD Bank + sitting on $9b CASH + GameStop stock for the rest. They’ve made an interesting proposal around using 1600 GameStop locations for fulfilment. Smart if they can make it work.

Update: Numbers still don’t add to $55b - I think there’s a $14b shortfall. Not sure about how they are planning to fund that.

> the should-be-illegal process of putting debt on the acquired company's balance sheet.

I agree it's weird but ultimately the check against dumb lending is natural consequences for the lender, right? If you ask me for billions in loans for your zero revenue company and I give it to you, whose problem is that but my own?

Wouldn’t that debt knock down the market cap as much as the value

Otherwise take out a $20b loan and put it in the bank. Assets increase $20b, job done.

Market cap will price in the debt, as it always does. Empirical evidence (dig through Google scholar) finds that cash assets, debt, profits, settlements, and the like, all are reflected in market cap changes at over 99% accuracy (the 1% is from measurement noise, so it may well be 100%).

Making debt of that form illegal would kill any company that needed money to stay afloat, such as during some emergency, or war, or COVID, or tons of events that companies regularly survive.

I’m disappointed and surprised you left out half of the conditions that grant him this compensation. You only included the one that suggests that all he has to do is buy a bigger company with GME stock. It was literally the first paragraph of your link:

“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”

This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow, cumulatively, as well.

I’m disappointed and surprised you left out half of the conditions that grant him this compensation and only included one that suggests that all he has to do is buy a bigger company with GME stock:

“ The award is divided into nine tranches that are eligible to vest only if the Company achieves both a “Market Capitalization Hurdle” and a corresponding “Cumulative Performance EBITDA Hurdle”.”

This changes basically everything. He can’t just buy any bigger company. The company has to earn way more cash flow as well.

> other than the should-be-illegal process of putting debt on the acquired company's balance sheet.

This is silly. No different than buying a house w/ borrowed money based on using that house as collateral.

Banks aren't stupid. If it's very likely to fail and the interest doesn't cover the risk, banks won't risk. There's typically no upside to banks. At best they get their interest and at worst they lose everything.

Cohen is already rich rich, his GameStop compensation doesn’t really matter much. The eBay acquisition could be a strategy to juice his compensation but I think it is much more likely he does believe that he can achieve his stated aims, which will financially benefit him much more in the long term.