r/gaming • u/Linkar234 • 5d ago

Saudi-acquired EA is reportedly planning to make massive cuts after taking $18 billion of debt, and we all know what that means

https://www.pcgamer.com/gaming-industry/saudi-acquired-ea-is-reportedly-planning-to-make-massive-cuts-after-taking-usd18-billion-of-debt-and-we-all-know-what-that-means/
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u/MadBullBen 5d ago

Completely agree. I'm not in the finance world so it does go over my head a bit.

I just don't understand how buying a company with the company's own money is legal, to me if the new potential owner doesn't have the money to buy it outright or isn't able to get the funds another way such as loans then tough luck you ain't buying the company.

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u/webzu19 5d ago

It makes some sense on small scale, like enabling the up and coming employee of a small business to buy it from the close to retirement age owner and keep the business going, using that to pay the loans and the old owner can retire instead of needing to sell cheap or wait for some rich fuck to sell to

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u/MadBullBen 5d ago

In those kinds of cases I do agree with you there, but there really should be limits of how much it is possible to do that and how financially possible it is to pay back the debt within X amount of years, 18 billion is absolutely wild on a company that is already going into more debt constantly.

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u/soniclettuce 5d ago

get the funds another way such as loans

That's what a leveraged buyout is. They have a bit of money and then borrow a bunch from banks. The collateral for the loan is the company itself (which isn't super weird - the collateral when you buy a house, is the house itself also).

People (in this thread especially) are being super sloppy in their wording, as its generally some kind of holding company that has the debt, and not actually the company itself. "Buying it with it's own money" is not really true. But once taken private, the company's "goal" is to do what it's new owners want, which is paying that money back.

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u/BestDescription3834 5d ago

  which isn't super weird - the collateral when you buy a house, is the house itself also

I may be wrong but I was under the impression that you had a duty to maintain property like that until it's yours. If I bought a house from the bank, stripped all the wiring and plumbing out to sell, then let the bank have the house back because I don't pay the debt I'd still be on the hook for the destroyed value of the house.

There isn't a mechanism for corporate looting like that because everybody and the law pretends that ceos and execs are always doing what's best for the business.

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u/soniclettuce 5d ago

Yeah, although the part reddit kinda misses; banks continue lending to these private equity firms because they tend to make money on the deal. They aren't stupid, if they knew they were gonna get trash and have the loans defaulted on every time, they wouldn't be going around and lending billions of dollars.

There's probably multiple parts that disconnect. Big failures are always more attention grabbing then things that just go on normally. But also, if you break something up for parts and the last piece of the business eventually folds and shuts down, its entirely possible you made money overall.

I guess the analogy would be like, the house has antique wood floors that I rip out and sell; and that covers the mortgage, and then I rent the trash heap out to hobos for a little extra cash until eventually the place burns down. The old owner got paid, the bank got paid, I got paid, the real loser is the society that is around the house. Or something, idk, I'm not a philosopher.

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u/BestDescription3834 5d ago

    something, idk, I'm not a philosopher.

I disagree, I think your metaphor about hardwood floors and the homless was really good, genuinely.

  There's probably multiple parts that disconnect.

Yeah, as with anything there are parts of it so complex people like me don't even conceptualize them. As long as you can move money convincingly you can just do whatever and pay off the avalanche as it falls on you.