GameStop’s $56 Billion eBay Bid Is Already Falling Apart

Ed Elson speaks with Rohan Goswami about whether or not GameStop can afford to buy eBay. Then, Charles Elson joins the show to assess the strength of Elon Musk’s claims against OpenAI in the ongoing trial. Finally, Ed breaks down what today’s hottest stocks have in common. Rohan Goswami is a Business Reporter at Semafor. Charles Elson is the Founding Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. Get your tickets to the Prof G Markets tour Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 0:01Speaker 00

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest, or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

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• 1:00Speaker 03

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• 1:29Ed Elson?

  Today's number? One million. That's how many bees escaped a beekeeper's truck after it crashed on the interstate highway in Knoxville, Tennessee, last week. According to transportation officials, local traffic was already congested, so this one will really sting.

• 1:48Speaker 05

  Money markets mad. If money is evil, then that building is hell.

• 1:58Ed Elson?

  Welcome to Profty Markets. I'm Ed Elson, kicking off with a terrible joke to start the week. It is May 5th. Let's check in on yesterday's market vitals. The major indices all fell as tensions continued to escalate in the Strait of Hormuz. The US and Iran exchanged fire as the US escorted two ships through the strait. That news sent Brent crude sharply higher and the yield on 10-year treasuries climbed on the prospect of higher-for-longer energy prices. Meanwhile, logistics companies fell after Amazon announced it was launching its own supply chain services. FedEx fell 9%, while UPS dropped 10%.

• 2:41Ed Elson?

  Okay, what else is happening? GameStop has offered to acquire eBay, a company four times its size, for $56 billion. CEO Ryan Cohen says the goal is to build a real competitor to Amazon, but the big question is, how does GameStop plan to pay for this? The company has around $9 billion in cash and claims TD Bank will provide $20 billion in debt financing. Cohen says the rest of the money will come from GameStop's stock. Despite the fact that the company is worth less than $11 billion, GameStop fell 10% on the news while eBay gained 5%. So, a lot of questions here. It is striking that GameStop is deciding to buy eBay and it is more striking how much

• 3:26Ed Elson?

  larger eBay is as a company. So here to discuss this acquisition, we are speaking with our friend Rohan Goswami, business reporter at Semaphore. Rohan, great to have you on the show. So, GameStop wants to buy eBay. It's four times the size. Just take us through how this can make sense, because it's something that's kind of confusing when we think about corporate M&A. How does this actually work?

• 3:51Rohan Goswami?

  Yeah, so GameStop has an enterprise value that's the market cap plus debt of around $14 billion and eBay's, as you said, is around $55 billion. It's a much bigger company. And so there are two ways that Ryan Cohen, who of course is the chairman of GameStop, the CEO of GameStop, and also GameStop's largest shareholder, there are a few ways that he's proposing to do this, right? So, half of that deal, he says, as you pointed out, would come from about $9.5 billion of GameStop's cash on hand, another $20 billion in what financiers call highly confident financing. That's TD Bank, his bankers haven't actually raised the money, but they feel, quote unquote, "highly confident" that they can raise that money. And there is like a beautiful poeticism to this deal happening right now.

• 4:34Rohan Goswami?

  Several of my colleagues, including my co-host and colleague Liz Hoffman, are in Los Angeles at the Milken Conference, sort of like the pioneering corporate raider, who in many ways pioneered this highly confident letter. So there's $9.5 billion of his cash, $20 billion of his stock. That brings us to around $30 billion. And the remaining $20 billion that he proposes would come from a massive dilution. He avoided using that word in his frankly disastrous CNBC interview this morning, but a dilution of existing GameStop shareholders. They would issue new shares that would then be handed over to eBay's existing shareholders. And that is how Ryan Cohen proposes to pay for this deal to take over a company that is, as you said, four times the size of GameStop. There are a lot of problems there.

• 5:19Rohan Goswami?

  We can sort of unpack all of them. The thing I would just highlight for you out the gate, Ed, is that this is not business as usual for Ryan Cohen. Ryan Cohen is used to dealing with retail investors who are obsessed with him, who live and die by his every word. He's used to moving stocks 10% or 15% up, just posting a little meme image of him leaning forward in a gaming chair. That's what he's used to. And frankly, he's dealing in the big leagues right now. And I know he likes to call himself the dumb money, and he says that the smart money is out to get him. But the fact of the matter is, Ed, he needs the smart money here. They're the guys who actually own eBay. And a lot of them went into this weekend. You saw how the stock moved on Friday when rumors first broke of this deal. The stock moved up 10%, 15%.

• 6:01Rohan Goswami?

  Investors said, whoa, okay, there's a real chance that this guy can pull this off. The second this guy started talking on CNBC today, the stock went from 10% up, 9% up, 8% up, 6% up, 5% up. Investors just don't believe what he has to say. And that's going to be his real problem here, not paying for it or dealing with the structure.

• 6:18Ed Elson?

  Okay, so you mentioned his disastrous appearance on CNBC. We have a clip of that. Let's watch that and then let's get your reaction.

• 6:25Speaker 07

  Arguably, if you're providing effectively all of your stock and then the cash that gets you to 20, you have this letter from TD. That's another 20. We're now at 40, but we're still off by, call it 16. And the 20, as far as I understand, while it's considered a highly confident letter, meaning TD's saying they're highly confident that they would provide the financing, it's not locked financing.

• 6:57Speaker 08

  Yeah, we'll see what happens.

• 6:59Speaker 07

  I hear you. I understand that. I'm just trying to understand where the rest of the money would come from.

• 7:07Speaker 08

  It's half cash, half stock.

• 7:10Speaker 07

  I hear you. I'm just saying that that math doesn't get you to the

• 7:18Speaker 07

  to the price that you're offering.

• 7:23Speaker 09

  Ryan, that's a pretty straightforward question. I don't get it. Like, where's the rest of the money coming from?

• 7:30Speaker 09

  Andrew laid it out pretty clearly.

• 7:32Speaker 08

  I don't understand your question. We're offering half cash, half stock, and we have the ability to issue stock in order to get the deal done.

• 7:43Ed Elson?

  So, I mean, there's so much to unpack in this moment.

• 7:47Rohan Goswami?

  Oh, yeah.

• 7:48Ed Elson?

  I mean, at first, it seems as though maybe he's just confused about what they're actually asking him. But then he seems to kind of like admit the thing that I guess he doesn't want to say, which is that they have to issue new stock, i.e. dilute shareholders. I mean, what do you make of this?

• 8:05Rohan Goswami?

  Yeah, he's got two problems here. One, he doesn't want his retail shareholders to hear the word dilution, because that's a scary word, and it's not a great word. And two, he knows on some base level, I mean, he's an incredibly brilliant guy, and he's a great businessman. He knows that eBay's existing shareholders are going to go, well, why do we want to trade our eBay stock, which just hit all-time highs, for potentially worthless GameStop shares that, you know, you could dump out of, retail could dump out of, that we don't really have any certainty in, because we're hitching ourselves to this really unknown and still somewhat scary shareholder base? That's problem number one. Problem number two is, look, Andrew's a former colleague. He's one of the best interviewers of all time. Generally, when you have the opportunity to make your case to the market,

• 8:48Rohan Goswami?

  and you're given 25 minutes on CNBC to talk about your long-shot case, your response isn't, well, I don't know, and this wasn't in the clip, but look at our website, and, you know, you're preying on our downfall.

• 9:01Ed Elson?

  Yeah.

• 9:02Rohan Goswami?

  But I think that's part of, look, I spent a lot of this morning and this afternoon. Talking to advisors on both sides of the aisle here, whether that's the GameStop side or the eBay side, I talked to folks who have known Ryan for a long time. I talked to institutional shareholders, trying to get a sense of what the market thinks. And there was a perception, a very real perception reaffirmed by this CNBC interview, that Ryan is a little bitter about the way that CNBC and the legacy press treated him in the 2021, 2022 run-up, where GameStop was on top of the world, where it was the meme stop frenzy, and where he felt fairly unfairly, like Andrew Ross Sorkin and folks at CNBC, had a target on his back. And we're kind of out to get him. And you could see that shine through in the passive aggressive nature of the interview. The problem, as we sort of talked about just now, is it doesn't really matter what Ryan Cohen thinks. It doesn't

• 9:45Rohan Goswami?

  matter what his retail shareholder thinks. It doesn't, as much as I respect Andrew, matter what Andrew Ross Sorkin thinks. There was one job that Ryan Cohen had when he got on CNBC's air, and it was to convince institutional shareholders, Vanguard, BlackRock, T-Ro, any of these big, really sophisticated money managers, that, hey, maybe I stand to make a chance at, you know, a buck fifty instead of a buck by going with Ryan Cohen's deal as opposed to sticking with eBay's deal, or sticking with eBay's stock. That was his only job, to get those guys on the phone, to get them setting meetings. None of them, at least the ones that I've spoken to, have any interest in engaging with him, right? And that's, like, it's not like, the last time we talked, like a Paramount Skydance, where you had a smaller company going after a bigger company. There, David Ellison was working the phones. He had sovereign wealth funds backing him. He had his dad's wallet

• 10:28Rohan Goswami?

  backing him. At least there's real money here. And there was a reason for those guys to come to the table. Ryan here had kind of one shot to make his case to the street, and blew it. And blew it brutally, by seeming kind of pompous and standoffish.

• 10:40Ed Elson?

  Well, I was wondering, I was wondering if the pompousness and the standoffishness was intentional, if he thought that by coming off as this kind of like rude, kind of crass, cold individual, that he looked strong in some way. But what you're saying is, you've pulled the room. It did not work. No one likes it.

• 10:59Rohan Goswami?

  Well, Ryan is working, I should be more, he's working two different rooms. You're absolutely right that it was intentional, and that if you go on Twitter now, his fans and his retail fanbase are loving it. They're talking about CNBC getting mogged. They're doing the whole, like, Andrew Ross Sorkin's spine is curved. And Ryan Cohen is sitting upright because he's, you know, mogging to eight clavicular here.

• 11:21Ed Elson?

  Yes.

• 11:21Rohan Goswami?

  He's mogging Andrew Ross Sorkin. And that's great. Ryan is very used to playing that bass. Ryan has no experience whatsoever dealing with institutional investors at in a deal context. Obviously, he ran Chewy. He's a public company CEO. So there were two different rooms he was going for. You're right that it was absolutely intentional, his standoffishness, I think. Nothing this guy does is by mistake. Unfortunately, that's not the room he needs to be winning over. He's got retail in the bag. They love him. They'll fall him to the ends of the earth.

• 11:47Ed Elson?

  Right.

• 11:47Rohan Goswami?

  The institutional guys are going, dude, this is like hostile M and A. You gotta take this seriously. It's not a joke. And and he failed to win any of those guys over, not a single one.

• 11:56Ed Elson?

  So we always love getting a prediction from you. Do you think this goes through?

• 12:01Rohan Goswami?

  No, no. It's not even like 50 50. No. Unless Ryan A gets actual some sort of really durable financing. And I know the Journal in their report talked about some sovereign wealth funds getting involved. And to be clear, I've heard nothing about that. But every bit of reporting that I've done on the sovereigns the last few weeks, obviously given the conflict in the Middle East, suggests they're not interested in cutting really big chicks checks and and sort of getting involved in in another messy bit of M and A. So unless he firms up his financing, unless the sovereigns come in, and unless he manages to sort of get in a time machine and undo the damage he did to himself this morning, no, there's no chance in hell. I would actually, I would actually bet, if I was allowed to bet and you were allowed to take the other side of that bet, then that by Wednesday, not even by Friday, by

• 12:45Rohan Goswami?

  Wednesday, eBay's board will have said, thanks, no thanks. And Ryan will sell his shares at a handsome profit and walk away.

• 12:51Ed Elson?

  I love it. Rohan Gasswamy, business reporter at Semaphore. Really appreciate it. Thank you for joining us.

• 12:59Rohan Goswami?

  Ed, always a pleasure.

• 13:00Ed Elson?

  After the break, Elon and Sam face off in court. And by the way, we are heading out on tour at the end of the month. So for more info and to get tickets to a show near you, head to profiteymarkets.com.

• 13:23Speaker 00

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior-like beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch in Bev Michelob Ultra Beer, St. Louis, Missouri.

• 13:52Speaker 01

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bullspend. And marketers are calling it out in. Dashboard Confessions.

• 14:01Speaker 02

  My boss asked for results, so I opened my dashboard for the only positive-sounding metric I had: impressions.

• 14:09Speaker 01

  Cut the bullspend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 14:22Speaker 03

  Energía baja. Falta de concentración? Nevada mental? You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade: Hydrates Better Than Water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los índomas persisten.

• 14:55Ed Elson?

  We're back with Prof G Markets. The Elon Musk versus OpenAI trial is heading into its second week. Last week, Elon Musk spent three days on the stand testifying that Sam Altman and OpenAI's president Greg Brockman conspired to, quote, "steal a charity."

• 15:14Ed Elson?

  Musk told the jury he would never have donated $38 million had he known it would be used to build an $800 billion for-profit company. Opening his attorneys pushed back, arguing that Musk was never committed to the nonprofit mission and is only suing to destroy a competitor. Greg Brockman is expected to testify this week. Sam Altman will take the stand later this month. So lots to get into here. Here to discuss this trial, we are speaking with our resident corporate governance expert, Charles Elson, founding director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. And yes, a relative of mine, my uncle, Uncle Charles, good to have you back on the show.

• 15:58Charles Elson?

  Well, it's good to be back. There was an old 60s show that had a character called Uncle Charlie. As long as I'm Uncle Charles, Uncle Charlie.

• 16:07Ed Elson?

  Uncle Charles.

• 16:09Charles Elson?

  He was a crotchety guy, by the way. Hopefully I'm not.

• 16:14Ed Elson?

  So we wanted to get your reaction to this because this is, this really is a corporate governance issue, the likes of which we've never really seen, where you had this nonprofit, supposedly a charity to Elon's point. And then suddenly you turn around a few years later and it's planning to go public at a roughly trillion dollar valuation. And so in a lot of ways, it seems like Elon Musk kind of has a point, but I'm not sure what the legal standing is exactly. And I wanted to get your views from the corporate governance perspective.

• 16:49Charles Elson?

  It's a great question. Well, you know, first of all, I've never known, you know, Elon Musk's reputation is such that he is a very much a profit oriented guy. Certainly his compensation at Tesla and his, and obviously proposed compensation at SpaceX, that kind of, kind of bears that out. It's not, I'm working to give all this money to charity. It's usually I'm working to give it to me who earned it. He will argue. So I think it's rather interesting to see him now on the side of the charitable giving nonprofit. I think that's kind of interesting. But you know, I think you gotta look at this as kind of a battle between two egos, if you will,

• 17:32Charles Elson?

  or one very large ego, certainly. And, you know, I don't want to say grudge match, but someone has taken this idea, run with it, and done very well. The other likes the idea too, and is running with it as well. Suddenly, you have two individuals who are in the same business, effectively competing with each other. And oftentimes, litigation is used as a tool, one way or the other, to slow down the competitor, or the competitor to slow you down. And this has sort of all the marks of something like that, I guess you could argue. Or it's just something rather personal between

• 18:14Charles Elson?

  the two. But as a, you know, a championing a charity, it doesn't feel like that from my standpoint. Because remember, Microsoft invested quite a bit in this. And this did not, this debate did not occur at the time that Microsoft made the investment. You think about it, Microsoft is a for-profit company. They didn't give this who their charitable arm. It was an investment for them. And I guess you have to ask yourself, well, why wasn't this point raised then? Why is it being raised now? And obviously, the venture's become so successful. You've got a competing venture who you expect will be successful. That was, you created a company that you had your Tesla shareholders invest in, even

• 18:57Charles Elson?

  though they thought, when they bought into Tesla, they were buying into AI. And, you know, it kind of leaves you scratching your head a little bit, as to what is really going on. Is there really a nonprofit purpose in this, or something else? It was interesting, many, many years ago, there's a very famous corporate law case involving Henry Ford. And Henry Ford stopped paying dividends in his company, Ford Motor Company, or reduced to special dividends, large dividends. That he thought he had made too much money. And that instead the country itself should enjoy the prosperity that he created through lower car prices, greater employee salaries, things like that.

• 19:38Charles Elson?

  And the court said, no, a business is a business to make a profit and your investors expected that from you. Well, that was the surface story. The underlying story, as it turns out, was that the investors who complained whose dividends he cut off, well, he cut off everyone's, but it was one particular group with two brothers named Dodge. And they were using the money to create the Dodge Motor Company, a competitor to Ford. And so it was argued that this really wasn't a case about the purpose of the corporation. It really was effectively an antitrust case. Now, there was more to the tale. And on this one, there may be more to this tale, too. Again, that's what the jury is supposed to figure out, what the judge is supposed to help the jury figure out. And we'll have to see.

• 20:22Charles Elson?

  It's an odd one in that respect. I agree with Mr. Musk that the thing started as a nonprofit and it's sort of morphed into a profit. But it'd be very hard to keep it as a nonprofit, given what it's involved in. And it was argued that from a governance standpoint, it probably should move into for-profit status as it creates greater accountability. But, you know, this is sort of uncharted waters. Rarely do you have nonprofits in these kinds of ventures. They're fair for the good of society. This one obviously had a significant profit potential, which is, I guess, going to be realized, or they hope they'll realize it. And he's created his own vehicle, which is not a nonprofit, by the way, and effectively is in the same space.

• 21:07Charles Elson?

  So one really has to wonder what is really going on here. And that's what the jury's got to figure out.

• 21:13Ed Elson?

  Does the intent matter here? It sounds, I mean, because it seems as though clearly part of the intent on Elon's part is that he doesn't like Sam Altman, he doesn't like OpenAI. He wants them to lose in some way. And that's kind of the case that OpenAI has made. And that's what they've publicly said. This is about jealousy, this is about ego, et cetera. At the same time, it also seems like the intent isn't to necessarily right or wrong, but it's to literally disintegrate the company. Like, he does, he no longer wants this company to survive. And I wondered, to what extent does the intent of that matter? Similar, along those same lines as, you know, if he decided to file this lawsuit now versus

• 21:57Ed Elson?

  a long time ago, what does that say about the intent of the lawsuit? Does that matter in front of a jury? Does that matter in terms of the law?

• 22:06Charles Elson?

  Sure, sure it will. You know, the, the timing is something and what, again, that was the story of Henry Ford. You know, why did you decide to do this now? Well, there was, there was, it turned out a different reason for it. And certainly a jury can consider that. Is this a meritorious suit? In the sense that, does he, does he really want it? Is he doing this to benefit the public, which the nonprofit supposedly does? Or it ultimately is about benefiting he and his own investors? And that's, you know, that, and that's something that I'm sure that they will consider. You know, what's the motive here? What's the solution to this thing?

• 22:47Charles Elson?

  If it, if it ends up in the end, he's complaining about the for nonprofit status of becoming a for-profit. If it disappears, let's say, who benefits? For-profit, a for-profit. He, his company will obviously, you knock out a competitor. And that's, or you, you employ the competitor's employees. I mean, that's the, you know, what is the real story here? Paul Harvey was a radio commentator in the sixties and seventies. And he always on his newscast had a, something in the end, he called it the rest of the story. He tells a story. And then he said, well, that's not really the real story. And I think the jury is going to have to figure out here, and with the help of the judge, what's the real tale here?

• 23:28Charles Elson?

  If you objected to it being a not-for-profit, why, when Microsoft contributed, why instead didn't you contribute?

• 23:37Ed Elson?

  Yes.

• 23:37Charles Elson?

  From a charitable foundation? Why did that occur? And you certainly aware of it, everyone was. Why now, when it looks? To be extremely successful and you happen to have a business it it it competing with it in the same space and obviously he'll argue as he will that no this he never expected this and etcetera etcetera and they'll argue as you as you spoke at the beginning of the segment that they say no this has nothing to do for profit non for profit it's concerned about a competition and an ego match and obviously you know he is not someone who people Mr Musk who people believe is a shrinking violet

• 24:16Ed Elson?

  Yeah

• 24:16Charles Elson?

  Just isn't and Mr Altman obviously has a has a well-known public persona as well so the battle of the Titans it's it's an odd one but you know it may have some impact in the future of AI or at least who makes the money in AI ultimately

• 24:34Ed Elson?

  Who do you think will win at the end of this it sounds like you think Elon won't won't win

• 24:39Charles Elson?

  You know I I I I never like to predict stuff like that because it's hard to figure it's hard to figure out I mean look we're not in that courtroom we haven't listened and heard what has been said or was going to be said and that's why it's really tough to handicap anything I mean based on the argument itself and based on the history here I think it's it would to me be a rather tough argument to make I think they've got some very strong defenses which they've obviously raised but you know who knows they're both parties are ably represented and the jury will have to sort this out like I said it it it's interesting to have these two Titans I mean Elon Musk was never considered an AI Titan you know

• 25:24Charles Elson?

  obviously electric cars and you know payment systems and things like that and he got interested in robot cars and whatnot and then AI and here you have it it's a business he wants to be in

• 25:38Charles Elson?

  And, you know, these folks that he helped, argued, created are in it too.

• 25:43Ed Elson?

  Yeah.

• 25:44Charles Elson?

  Now, if they go public, obviously, you'll have other investors who would like to make some money on this business. As his investors in Tesla want to make money in the business, it's the investment. You know, look, I think this all goes back on a governance angle to the difficulty of companies really dominate, if you will, by one individual, controlling shareholder, if you will. And when you lose accountability to everyone else, which controlling shareholders have, particularly under certain states' law, you know, you create problems like this where you don't have a board that, you know, representing other investors to say, hey, do we really want to be in this right now? How does this look? How does this feel?

• 26:28Charles Elson?

  Is this a good use of your time? I mean, having to take off a week and, you know, end up on the stand and getting beaten up, you know, through cross-examination is not a great way to be spending your time on something like this. What is the benefit to his investors for this?

• 26:46Ed Elson?

  Yeah.

• 26:46Charles Elson?

  And Mr. Altman, obviously, has to defend himself. So, you know, obviously, I'm sure he doesn't want to be there either. But of course, he's the defendant. He's not the plaintiff, and he has to respond.

• 26:55Ed Elson?

  I have one final question before you go. We just learned that SpaceX's board has approved a pay package that would give Musk 200 million super voting restricted shares, but only if the company establishes, one, a permanent human colony on Mars with at least 1 million residents, and, two, if it hits a $7.5 trillion valuation. Just before you go, I just wanted to get your reactions to that compensation package.

• 27:23Charles Elson?

  Well, not very well. It's to the moon, to Mars. How about to Pluto? Or Galaxy X, you know, look, you have to remember it's his company. He controls it. No matter what the board says, he has the right to appoint directors and control it. So basically what you're hearing is what he wanted from them. You know, was there a pushback? I don't know. But that's the danger investing in a controlled company. Is you have absolutely zero control over what happens. And under Texas law, if it ends up in Texas, as Tesla did, your legal recourse is pretty slim. So, you know, before you invest, do you really trust ultimately that your interest will be protected?

• 28:08Charles Elson?

  And that's a, that's a tough question, given obviously this past history and controversy, particularly over compensation and obviously over, you know, Tesla and AI.

• 28:18Ed Elson?

  Yeah. All right. Charles Elson, founding director of the John Weinberg Center for Corporate Governance at the University of Delaware. Uncle Charles, always love having you. Thank you for joining us.

• 28:28Charles Elson?

  And thank you nephew Ed. I hear more about you than your grandfather. That's the same name. Pretty good.

• 28:36Ed Elson?

  We love that. We love that. Okay. Thank you, Charles.

• 28:41Charles Elson?

  Take care.

• 28:47Ed Elson?

  Some of the sexiest stocks in the market right now are some of the unsexiest names. Companies like Generac, which makes HVAC equipment and Caterpillar, which makes tractors, are absolutely ripping in the stock market right now. Caterpillar stock is up 170% in the past year alone. So why are these boring businesses on such a crazy run? Well, two words, data centers. Big tech is planning to spend $700 billion on data centers in the next year. And that means that the companies that build the equipment that make those data centers are in high demand. That includes Caterpillar and Generac and also five other major players, specifically

• 29:28Ed Elson?

  Cummins, Vertiv, Comfort Systems, Quanta and EMCOR. They are the seven hottest companies in the stock market right now and our friends over at Unhinged. Have coined a new term for them. They are calling them the data center seven. The data center seven are up an average of over 170% in the past year. They're also trading at an average of 38 times forward earnings. For context, that is almost double the multiple of Meta, which is trading at 20 times forward earnings, despite the fact that Meta's business is growing twice as fast as, say, Generac. In other words, this is becoming a frenzy. But it is possible that the markets are missing something.

• 30:11Ed Elson?

  Because while data centers are in high demand right now, we should also acknowledge that there are a lot of obstacles in their way, too. Last week, we discussed with Jigar Shah and John Perella how energy constraints are making it increasingly difficult to power these data centers. There are also supply chain issues and labor shortages, and of course, public opposition. Last month, the state of Maine passed a moratorium on all new data centers, and similar proposals have now been introduced in 13 other states. And we're already seeing the effects of this. Data center capacity dropped 50% at the end of last year. And despite all of these new plans that we keep seeing,

• 30:55Ed Elson?

  roughly 40% of this year's data centers are expected to be either delayed or simply canceled. In other words, this gigantic data center build out isn't a given. It's a question. And at 38 times forward earnings, it's hard to argue that investors are really acknowledging that fact. Will the data center seven stocks go down anytime soon? I doubt it, as it's a very hot sector right now. But if these data centers don't start physically materializing in the real world in the way Wall Street hopes they will, well, then this story is going to change very, very rapidly. In sum, look out below.

• 31:39Ed Elson?

  Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Chalon, Isabella Kinsel, Chris O'Donoghue, and Mia Silverio. And our social producer is Jake MacPherson. Thanks for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.