The contrast couldn't be greater.
Here's Best Buy (BBY) with cash flow declining like lightning that might go private in part because a former CEO and founder can't believe how his mighty colossus has fallen. And on the other side is Amazon (AMZN), which yesterday raised $3 billion in a bond offering for general corporate purposes.
One founder, Richard Shulze, wants to lay on billions of dollars in high-cost debt to take advantage of the low price of Best Buy, with the hopes, no doubt, of bringing it public again one day in more forgiving times. I can only imagine the size of that coupon. Could they borrow at 5%, 6%, 8%?
On the other hand, Jeff Bezos is borrowing at three five- and ten -ear intervals for 0.742%, 1.301% and 2.601%. Those are Uncle-Sam-like rates for Amazon. Incredible given how, when Bezos was building Amazon, it was always considered to be one step from bankruptcy.These two companies are mortal enemies. How many times a day do people sample at Best Buy, get hassled to take the warranty and be offered a price that may not be as good Amazon but has to be carried to your house by yourself? How many people pay taxes at Best Buy and don't pay taxes on Amazon? Yet one is going to be armed with incredibly high-cost debt and the other is borrowing as if it has Triple-A credit rating. Best Buy's not bring a knife to a gunfight, it's going empty-handed. Of course there are some real ironies here. First, Best Buy would be taking on debt to go private and shrink. Amazon's taking on debt because there are so many opportunities to grow. Best Buy might not make it if it does nothing. But who in heck would take down the debt that Schulz is offering? Perhaps the same people who took down the debt of the Tribune Corp. when it went private, the employees? That was the last time I heard about a deal that would be this dumb. But Amazon? With that amount of capital and at those prices not only does it have a chance to put Best Buy in an early grave, it can go after almost every retailer that is burdened by high-cost debt and brick-and-mortar leases.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV