Thread by @rdlowrey

This is the 3rd 🧵in a series on #BBBY.

This installment examines why the company may be on the precipice of acquisition and why a spin-off of buybuyBABY is likely.

1. Politics, Antitrust, Icahn & RC's 🎈
2. Antitrust, Board Interlocks & Newell Changes 🍏
3. Spin a Baby 👶

👇

Previous threads are linked here. It's important to read them first for crucial context:

1. bit.ly/40aACKI
2. bit.ly/3napzCO

Legal disclaimer next, content follows.

Note: none of my tweets should be construed as legal, tax, financial, or investment advice. I'm sharing my personal research as an individual investor for educational purposes.

⚠️ INVESTING IS RISKY ⚠️

I hold a BBBY position because my personal risk tolerance is off-the-charts.

If we assume from the previous threads that Icahn intends to purchase #BBBY and is negotiating HSR approval, one might expect to see antitrust concessions sidestepping interlocking directorates at NWL (15 U.S.C. § 19).

But we have yet to discuss the most common antitrust remedy.

One of the FTC's primary tasks is to enforce Section 7 of the Clayton Act, 15 U.S.C. § 18, which prohibits mergers when their effect may be to lessen competition.

In such cases, asset or business divestiture is by far the most commonly negotiated remedy.

In particular, NWL's L&D segment (which makes the baby stuff) could be unfairly advantaged by Icahn-controlled buybuyBABY; the greedy monopolist might jack up prices for mothers and babies.

The FTC could well *demand* divestment of the BABY business as an HSR consent condition.

This idea is important because — previously — a full acquisition of BBBY seemed the likely first step with a possible BABY spin-off only coming later.

A divestment demand means we'd expect to see BABY spin first.

But can we find evidence for an *in-flight* BABY divestment?

If a BABY spin-off were already in-progress it would have happened without shareholder approval, so applicable business laws must be checked for viability.

BBBY is a NY corporation, so let's check there first.

DANG IT, BOBBY! 5 years?!? Brutal if you're an RC+BABY truther.

So, NY corporate laws are a challenge. But there seem to be lots of recent examples of NY corps spinning off subsidiaries without conducting proxies to obtain shareholder approval (pics).

What gives?

Returning to the NY Business Corp Law § 912 we see caveats. Only *domestic* corporations are limited by these restrictions. BBBY is a domestic corporation in New York ... but what about BABY?

Jackpot. buybuyBABY is *not* a domestic corporation in NY and is domiciled in DE where no shareholder approval is required for the controlling company (BBBY) to spin off the subsidiary (BABY).

Spin-off back on. So where might we find evidence of one?

Let's look at the infamous 10-Q filing from 1/26.

BBBY accurately summarized its financials in the NT 10-Q extension request filed on 1/5 before subsequently *blowing* through the extended 1/10 deadline.

Surely we would get some new info to justify the 3-week filing delay?

The only new info in the 10-Q once we finally got it was the ABL default front-and-center. BUT the ABL default didn't even occur in the Q3 reporting period?

And the language is weird. "Events of default" and "among other things" sound like maybe we aren't getting the full story.

Something fishy happened "on or around" 1/13. What else was going on then?

Hmm. Very strange. Cost-to-borrow skyrocketed above 400% (!) and we saw massive price appreciation. Did something leak? Did someone buy-in?

We can't really say ... yet.

A few weeks later we saw a pitchbook screen cap corroborating our suspected date of 1/13. And it suggests buybuy BABY might have been acquired.

Interesting, but this isn't anything concrete to go on. And besides, it rumors Sycamore Partners as the buyer (bummer for RC-truthers).

So now we have third-party confirmation (or at least a rumor from an industry source) that BABY is being bought.

Let's try to understand what a transaction like this might look like.

As with most things in business, the story revolves around taxation (and its avoidance).

Earlier in the thread we saw that Jefferies recently spun off Vitesse to shareholders tax-free.

U.S.C. § 355 governs the distribution of stock and securities of a controlled corporation. In tandem with § 368(a)(1)(C) and § 368(a)(1)(D), we can understand the tax-free part.

IRS Revised Ruling 2003-79 provides a user-friendly example of how an acquirer can buy a spun-off subsidiary without tax consequences.

Let's take a look (and really frustrate the GME elitism crew by adding our own RC-inspired terminology in doing so).

Take time to understand…

This is the *really* important part. Spend time on this annotated image and really understand what's going on here. To avoid taxation, a deal must meet the requirements of:

- § 355
- § 368(a)(1)(C)
- § 368(a)(1)(D) … which specifically involves "reorganization"

In a spin-off like this, the BABY stock only belongs to shareholders for a brief moment in time before the acquirer (GME in the example) buys it from BBBY shareholders in exchange for GME shares.

💥💥💥 IN A BABY SPIN-OFF, BBBY HOLDERS WILL ALL GET ACQUIRER SHARES 💥💥💥

"But D4, this is all still hypothetical."

Yes, but now we have:

- a rumor about a 1/13 BABY acquisition
- market effects suggesting something happened around 1/13
- "events of default" on or around 1/13

So let's circle back to the ABL agreement BBBY defaulted on back in Jan …

Let's zero in on one specific event from the list and see what subpart (i) has to say …

The "liquidation" and "reorganization" REQUIRED by a tax-free subsidiary spin-off under U.S.C. § 355 just so happen to also represent an "event of default" under the ABL agreement's Article VII subpart (i).

🤯🤯🤯

🚨 SPECULATION 🚨

A BABY spin-off on or around 1/13 is *very* likely to one of the "events of default" that BBBY sandbagged in its 10-Q and the real reason the company RACED to deliver the late filing the DAY AFTER the ABL Admin Agent gave notice.

🚨 SPECULATION 🚨

The entire charade around the "failure to prepay an overadvance" and delaying the 10-Q was manufactured to hide what was really happening: an ABL default resulting from a BABY spin-off reorganization.

Cool. So BABY is spinning off. BBBY isn't going bankrupt. Great. But the pitchbook rumor still said it was Sycamore Partners doing the buyout.

Well, in an FTC-mandated divestiture, regulators want to see multiple viable buyers first.

🚨 SPECULATION 🚨

The Sycamore Partners Pitchbook rumor was real. Regulators needed to see multiple viable potential divestiture buyers for the BABY spin-off and BBBY would need to demonstrate this reality.

The gov't wants to avoid being hoodwinked by monopolistic acquirers divesting only on the surface level. FTC cares who is on the receiving end of the divestiture. They want to see operators with real plans for the business and experience succeeding in the relevant industry 🎈

So who is the acquirer? If you've made it this far you may have guessed that I think GME is about to acquire BABY and 🩳 will be forced to deliver GME shares to. EVERY. SINGLE. BBBY. HOLDER.

It's no wonder every fake GME "elitist" influencer is screaming at you to stay away …

One need only read the RC Ventures letter to BBBY to see exactly how this is going down. GME is buying BABY and Icahn is taking BBBY core as soon as the divestiture of BABY completes.

But RC sold, right?