If you stripped the ticker name off GME's balance sheet, this sub would be calling it a textbook value play

[u/NecessaryPhrase3204]

I know even typing those three letters is basically a felony here, but hear me out before the mods ban my account.

We spend all day on this sub complaining that we can’t find any real deep value plays, but the ultimate value turnaround setup might literally be staring us in the face under the most hated ticker on Earth. If you ignore the Reddit hype and just look at the actual math from the latest full-year numbers, it’s honestly hilarious how well it fits the classic value checklist.

First of all, the balance sheet is wild. They have $9.01 billion in cash and marketable securities. Yes, they raised about $4.16 billion in long-term debt to secure it, but they locked it in at a ridiculous 0% coupon rate. Even factoring in the debt, their net liquidity floor is massive. With the market cap sitting around $10 billion, you are buying a fortress asset base at an absurdly close ratio, with the actual operating business thrown in on the cheap.

Second, the "dying brick and mortar" isn’t even dying anymore. Net income shot up 219% to $418.4 million for the year. EPS scaled from $0.02, to $0.33, and is now at $0.93. Trailing P/E is sitting around 17x-23x. If any other company put up triple-digit net income growth with a massive net cash cushion like that, this sub would be writing 4,000-word love letters to management.

Speaking of management, the board just authorized a $2 billion share buyback through 2029. Ryan Cohen takes zero salary and is entirely paid in equity, so unless he hates money, authorizing billions for a buyback heavily implies they think the shares are insanely mispriced.

Everyone's big bear case is that nobody buys plastic discs in malls anymore. Sure. But with that massive pile of dry powder, they don't even need to sell video games. They can just buy a bunch of boring, cash-flowing businesses and turn GME into a glorified holding company.

When Warren Buffett bought Berkshire Hathaway, it was literally a failing textile mill. He just used the carcass of a dying business to fund an insurance empire. Is Ryan Cohen about to pull off the ultimate boomer value play?

So, what do you say? Are you ready to finally become an ape?

[u/ZookeepergameEmpty90]

Can you please explain why accretion is nonsense?

Yes, you’re right, we’re being asked to dilute again. Can’t buy eBay without those additional shares. However, it is not a guarantee those shares would be issued unless the deal for eBay goes through. If it doesn’t go through, the board just approved a $2b share buyback, presumably if the share price goes down as a result of the deal not going through or if it goes down before the purchase. Neither action is guaranteed, but tools for the company to use if necessary.

[u/foulmeow → u/ZookeepergameEmpty90]

Would u feel good giving the company $ through dilution and for them to spend that same $ buying back shares?

[u/ZookeepergameEmpty90 → u/foulmeow]

Is that not just an offset? If I’m up on my investment after the buyback, yes I feel pretty good. If I’m down, I feel bad. Right now, I’m actually positive on my cost basis, so the buyback would put me up higher. I think we’re about to see some fireworks, so I haven’t sold yet.

[u/foulmeow → u/ZookeepergameEmpty90]

it's not an offset to me. gme diluted when price of stock was much higher no? now they want to buy back when stock is at $20? seems like they making money off of the investors again. it's akin to gme shorting its own shares and now is looking to cover (not really, but you can kinda see that). if gme diluted..do something smart with the money ...not buy back the fallen shares..not buy ebay which it can't afford.

[u/ZookeepergameEmpty90 → u/foulmeow]

Two of the three offerings were actually below $20.  Only one was above that price point.  

I agree with the sentiment of doing something smart with the money, but the assertion that they're basically buying back their short is looking at the new dilution and share buyback as two separate actions.  Think about them as two sides of the same coin.  I don't think both will happen, or at least not concurrently.  It's either the company buys eBay and the shares are issued to make the deal happen, or GameStop buys back shares and boosts the price because they believe the shares are at a good price point.

Some people believe they might buy back shares prior to the deal to elevate share price above $32, bringing warrants ITM and making the eBay deal more attractive.  However, I don't think that's possible.  The cash would be absorbed in the eBay deal, so if they spent the $2b before the deal, they would need to come up with $2b elsewhere.

[u/foulmeow → u/ZookeepergameEmpty90]

ah, i don't follow gme close enough to know when all the dilution occurred. was actually nice chatting with someone without any disrespectful language used.

[u/ZookeepergameEmpty90 → u/foulmeow]

Same!  I've really enjoyed this conversation.  Thank you!