Author Topic: GME - Game Stop Corp  (Read 69297 times)

matt@thesovagroup

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Re: GME - Game Stop Corp
« Reply #100 on: December 11, 2019, 09:03:13 AM »
One area where GME got a lot of cash flow was the decrease in inventory.  Almost $600m in working capital was freed up from the previous year and this is not from just closing stores.  This liquidation of the inventory probably won't be able to repeat next year. They are sort of burning the furniture to light the house until next Nov with the new console cycle. 

It's just a great story to watch play out.   


peridotcapital

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Re: GME - Game Stop Corp
« Reply #101 on: December 11, 2019, 09:03:42 AM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?
« Last Edit: December 11, 2019, 09:14:22 AM by peridotcapital »

matt@thesovagroup

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Re: GME - Game Stop Corp
« Reply #102 on: December 11, 2019, 09:12:34 AM »
Some people always wonder why companies don't just liquidate when their time has come.  I think the answer is obviously they like to keep their "empire". 

GME: As of November 2, 2019, we classified our corporate aircraft, with an estimated fair value, less costs to sell, of $12.8 million as assets held for sale

This seems like the right decision now, but you have to wonder if this should have been done much earlier and what other things like this are hiding in their corporate SG&A. 


dwy000

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Re: GME - Game Stop Corp
« Reply #103 on: December 11, 2019, 09:31:31 AM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

If they use all the cash to buy back stock.  I would have said that was a crazy capital allocation decision before last quarter.

dcollon

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Re: GME - Game Stop Corp
« Reply #104 on: December 11, 2019, 11:08:43 AM »
I just inquired on the cost to borrow GME.  I was quoted 34.5%.

thepupil

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Re: GME - Game Stop Corp
« Reply #105 on: December 11, 2019, 11:32:36 AM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.

peridotcapital

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Re: GME - Game Stop Corp
« Reply #106 on: December 11, 2019, 12:01:45 PM »

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.


Fair point, but the time period in question (November 2008) and what was going on with the economy and credit markets at the time probably had a lot to do with that particular situation. Assuming a similar economic environment to today, that seems highly unlikely, but you are right, unlikely things can happen at an unlucky time.

RadMan24

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Re: GME - Game Stop Corp
« Reply #107 on: December 12, 2019, 11:46:18 AM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.


Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

Gee, wonder which one would struggle of there was a credit crisis.

blainehodder

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Re: GME - Game Stop Corp
« Reply #108 on: December 12, 2019, 12:05:47 PM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.


Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

Gee, wonder which one would struggle of there was a credit crisis.

Would you rather a Blockbuster comparison which is probably more apt? This is 2019. The internet exists. It is in game creators' best interest to cut out GME. What could possibly turn the revenue trend around? What melting retail company has managed to close down expediently to return cash to shareholders in the face of complete technical obsolescence regardless of balance sheet strength?
« Last Edit: December 12, 2019, 12:09:41 PM by blainehodder »

thepupil

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Re: GME - Game Stop Corp
« Reply #109 on: December 12, 2019, 12:16:30 PM »
traded down 6 points to $94 / 12% yield. I would still short if there was borrow and if IBKR did not require me to short $100K of face lol.

Your order has been rejected due to limitations of the corporate bond borrow market. Orders to sell short corporate bonds must result in a net settlement of at least $100000 face value.

GME has $290M of cash onhand (before the holiday season started) and their only debt is $419M of the March 2021 notes. Their revolver matures in late 2022, is undrawn, and has capacity of $400M. What are the odds that the business collapses so much in 2020 that they can't repay that debt between revolver capacity and cash onhand? Seems like an opportunistic buy in the low 90's...

Edit: I just read the call transcript from last night and they expect after Q4 to have >$1B of liquidity (cash plus revolver capacity), which implies Q4 free cash flow of >$300M. How on earth could they default on the 2021's?

https://www.sec.gov/Archives/edgar/data/104599/000010459908000056/ccs063008_10q.txt

this is Circuit City's 10Q in the quarter before they filed for BK, they filed in November 2008. As of June 2008, they had virtually no long term financial debt, significant net current assets (cash & inventory less payables and stuff), stockholder equity of $1.3 billion, they filed 5 months later, because their trade credit was pulled before the holiday season and they faced a liquidity crisis.

I think stranger things could happen then a retailer that's shedding sales at a 20% rate files for bankruptcy and or has trouble refinancing its unsecured bonds, regardless of the current state of the balance sheet.

I wouldn't want to be a lender to GME at any price that doesn't allow for huge upside.

At $94/11%, I'd happily lose the 14% cumulate or whatever on a short position in the base case they are able to pay off the bond as a general hedge against things in far better fundamental shape. Of course at $100 / 5.7% (yesterday's price) it was even more assymetric so if it trades back to par, maybe i'll consider shorting $100K. Even with fixed upside thought, that's just a big notional position for something that probably has some borrow cost built on top if it.


Are we really comparing Circuit City which had only $90m in cash and $110m in debt to Gamestop which has $290m in cash and $420m in debt after spending $180m on buybacks?

Gee, wonder which one would struggle of there was a credit crisis.

you are welcome to buy the bond @ $95 and make 900 bps over the treasury if you think it's such a sure thing.

Do you think the AR/Credit departments at GME's vendors are having discussions about GME's survival? I think they would be, but I could be wrong.

Retailers have a lot more liabilities than debt. they have landlords (I know GME has been shortening lease term for years but they still have minimum payments), vendors, etc.

I'd either be in the equity and get paid a multibagger if the rebound comes as it eats up all the shares or not play.

to be short the stock or long the bonds makes little sense to me. they are both short volatility positions in an fundamental situation of extreme volatility (collapsing sales and share count).