Well played, eBay
The $1.2 billion deal finds eBay paying $24 a share to Gmarket investors. eBay already has a majority of the stock pledged in favor of the offer -- including Yahoo!'s
After serving as the gateway for $3.2 billion worth of transactions in South Korea last year, it's easy to see why Gmarket became an attractive buyout candidate. eBay's own entry -- auction.co.kr -- is no slouch, having enabled $2.2 billion worth of deals in the country. However, eBay would never be the dominant player in the world's sixth-largest e-commerce market. By the end of this quarter, it will be.
The move is a surprise, because eBay has typically settled for minority stakes in rival exchanges like Craigslist and MercadoLibre
MercadoLibre's stock opened just marginally higher, but one has to wonder whether eBay begins knocking on the door of the South American speedster, too. Loading up on foreign winners would also be a good way to deflect criticism over eBay's shortcomings closer to home.
I recommended shares of Gmarket to Motley Fool Rule Breakers subscribers last year. I can appreciate being taken out at a premium -- especially when the S&P 500 has tanked by 38% in that time -- although I still believe that Gmarket would have been worth more than today's $24 buyout price in the long run.
That's the upside of picking disruptive growth stocks. One of my first recommendations for the growth stock newsletter -- ProFlowers.com parent Provide Commerce -- was bought less than a year later by Liberty Media
Naturally, there are risks when it comes to investing in fast-growing stocks. The risks are only amplified when you're buying into foreign darlings like Gmarket and MercadoLibre. However, as long as there are larger cash-rich companies looking for an extra boost -- and investors willing to reward earnings growth with market premiums -- it's an area that risk-tolerant shareholders shouldn't ignore.