TD Reddit Mentions | ChartExchange

Read Part 1 here: https://www.reddit.com/r/Superstonk/s/9jrpiuoEvZ
What Changed in 2001
Before June 2001, companies that acquired other companies had to amortize goodwill over a maximum of 40 years. Every year, a portion of the acquisition premium was charged against earnings. If you overpaid, your income statement showed it. There was a cost to being reckless.
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS 142 and eliminated mandatory amortization. Goodwill now sits on the balance sheet indefinitely, tested once a year for impairment.
Management decides if and when to write it down. Companies objected to a separate rule change (eliminating pooling-of-interests accounting), so the FASB removed amortization as a political concession to get industry buy-in. It was not an accounting improvement. It was a deal.
The FASB is a private nonprofit, not a government agency. Its board is stacked with former Big 4 partners, investment bank executives, and asset managers. The SEC gives its standards the force of law. The entities most affected by the rules are the ones writing them.
What Happened Next
The effects were immediate and have compounded for 25 years.
Goodwill on US balance sheets exploded. Before 2001, goodwill was roughly 7% of total assets for US companies. It is now far higher. For S&P 500 companies, goodwill represents 30-40% of total stockholders’ equity. Total goodwill on US public company balance sheets is now estimated at $5.6 trillion. That is $5.6 trillion in phantom asset value propping up reported book values across corporate America.
M&A volume went vertical. Since 2000, over 790,000 M&A transactions have been announced worldwide with a combined value over $57 trillion. Global M&A deal value peaked in 2021 at nearly $6 trillion in a single year, a 64% jump from 2020 and the highest annual M&A value since records began in 1980. The removal of goodwill amortization did not cause all of this, but it removed the brake. Overpaying no longer cost anything on the income statement.
Private equity went from niche to dominant. In 1997, private equity accounted for 4% of total US M&A dollar volume. By 2007, it was 28%. PE deal value exceeded $1 trillion in the US alone in 2021. The industry doubled its deal count since 2006. PE firms now account for roughly 20% of global M&A value even in slower years. The entire PE model depends on acquiring companies at premiums and eventually selling them. The 2001 rule change made the acquisition side of that equation painless.
Why This Matters: The Incentive Structure
Under the old rules, if you paid a $500 million premium for a company and amortized over 20 years, you took a $25 million annual hit to earnings. That showed up every quarter. Analysts saw it. Investors saw it. It created discipline.
Under the current rules, you pay the same $500 million premium, book it as goodwill, and it never touches earnings. Your income statement looks the same as if you had never overpaid. The only scenario where it hurts is if you formally impair it years later, and management has wide discretion over when to do that.
The result is a system that rewards acquisition-driven growth over organic growth. Building a business slowly generates no goodwill and no balance sheet inflation. Buying one at a premium inflates your assets immediately with no earnings cost. The accounting rules are not neutral. They tilt the playing field toward buying.
The Tax Double-Deal
It gets worse. Companies do not just get a permanent asset on the balance sheet. They also get to deduct it on their taxes.
Under IRC Section 197, goodwill is amortized over 15 years for federal tax purposes. Every year, a company that created goodwill through an acquisition deducts a portion of that goodwill from its taxable income. This is a real tax benefit that reduces cash taxes paid to the government.
On the balance sheet (GAAP), the same goodwill is never amortized. It stays at full value indefinitely, inflating reported assets, equity, and book value per share.
The company tells investors: this asset is worth what we paid, permanently. The company tells the IRS: this asset is losing value every year, so we owe less tax. Both cannot be true at the same time. But the system lets companies claim both simultaneously. Full value to the market. Depreciating for the tax man.
This is not a gray area or a technicality. It is two branches of the regulatory system giving companies opposite treatment of the same line item, and companies collecting the benefit of both. The permanent asset inflates their stock price. The amortization deduction lowers their tax bill. The incentive to overpay for acquisitions is not just zero-cost on the income statement. It is actively subsidized by the tax code.
The Impairment Charade
Goodwill impairment is supposed to be the safeguard. If an acquisition fails, the goodwill gets written down. In practice, impairments are delayed, discretionary, and arrive long after the damage is done.
AOL Time Warner recorded a $54 billion goodwill impairment in 2002, the largest in history at the time. The merger had already destroyed enormous shareholder value before the write-down acknowledged it.
Microsoft paid $7.2 billion for Nokia’s phone business in 2014 and took a $7.6 billion impairment just one year later. Nearly the entire purchase price was wiped out.
GE took a $22 billion impairment on its power business in 2018, more than twice the $10.1 billion it had paid for the Alstom assets. The impairment was larger than the acquisition because GE had been carrying legacy goodwill from earlier deals in the same reporting unit.
ConocoPhillips wrote off $25 billion in 2009. Kraft Heinz took $15.4 billion in 2019. AT&T wrote down $15.5 billion in 2020. In 2020 alone, US companies recorded $142.5 billion in total goodwill impairments, the most since the 2008 financial crisis.
In 2024, 8,134 companies wrote down $96 billion of goodwill. Research suggests approximately one-third of all recorded goodwill represents overpayment.
These write-downs always come after the fact. The goodwill sat on the balance sheet inflating book value for years before anyone admitted it was worthless. Management had every incentive to delay because the impairment hits earnings all at once. The system is designed to hide bad acquisitions, not prevent them.
The Silicon Valley Pipeline
The goodwill rules are invisible infrastructure for the venture capital to acquisition pipeline. The standard Silicon Valley path is: start a company, raise VC funding at escalating valuations, get acquired by a large tech company at a massive premium. Almost the entire purchase price of a typical startup acquisition is goodwill because startups have minimal tangible assets.
If acquirers had to amortize that goodwill over 10-25 years, every startup acquisition would drag on earnings for a decade or more. Acquirers would be far more price-disciplined. Exit valuations would be lower. Lower exit valuations would compress funding-round valuations. VCs could not underwrite the same return profiles. Less capital would flow into the startup ecosystem at those terms.
The entire chain from seed round to acquisition exit is calibrated to a world where the acquirer pays no earnings penalty for overpaying. Change that one rule and the math breaks at every level.
The PE Flywheel
Private equity runs on the same mechanic at industrial scale. The standard PE playbook is: acquire a company using leverage, bolt on additional acquisitions to grow it, then sell or IPO the combined entity at a higher multiple.
Every bolt-on acquisition creates more goodwill. Under current rules, that goodwill accumulates without amortization. The PE portfolio company’s balance sheet grows with each deal. Book value inflates. The company looks bigger and stronger on paper with each acquisition, even if the premiums paid were excessive.
When it comes time to exit, the PE firm sells a company whose balance sheet is loaded with accumulated goodwill from years of acquisitions. The buyer takes on that goodwill, adds more from the purchase premium, and the cycle continues.
Goodwill accumulates because companies do more deals, which means more goodwill added to whatever goodwill they were already carrying. It only decreases when someone decides to impair it. The practical result is that goodwill becomes a more and more significant part of corporate balance sheets over time. The trend is unmistakably up.
Who Benefits
The accounting firms that audit the goodwill impairment tests. The investment banks that advise on the acquisitions. The law firms that structure the deals. The PE firms that flip the companies. The executives whose compensation is tied to metrics that goodwill inflates. The asset managers whose funds hold the inflated stocks.
These are the same entities whose former partners and executives sit on the FASB board and its advisory council. Every attempt to restore goodwill amortization has died at this board. The most recent attempt, in February 2026, ended with no vote and staff told to do more research. The FASB chair said amortization “makes more sense” but he is “skeptical as to whether the board could get that through.”
The board cannot fix a problem that benefits the people who sit on it.
The Numbers
• $5.6 trillion in goodwill on US public company balance sheets
• 30-40% of S&P 500 equity is goodwill
• 790,000+ M&A transactions since 2000, worth over $57 trillion
• 4% to 28%: PE’s share of US M&A volume from 1997 to 2007
• $6 trillion: peak annual global M&A value in 2021
• $142.5 billion: goodwill impairments in 2020 alone
• One-third of all goodwill may represent overpayment
• 25 years since amortization was eliminated
• Zero successful attempts to restore it
Enter GameStop
Everything described above has played out behind closed doors for 25 years. PE firms, Big Tech acquirers, and investment banks have used the goodwill loophole quietly, in boardrooms, with friendly auditors, and nobody outside of accounting circles noticed or cared. The balance sheets inflated when the deals closed. The premiums disappeared into a line item nobody reads.
GameStop is doing it in broad daylight.
On May 3, 2026, GameStop submitted a non-binding proposal to acquire eBay for $55.5 billion at $125 per share. Half cash, half stock. GameStop had already built a 5% economic stake through derivatives and common stock before announcing. TD Securities provided a $20 billion highly-confident letter for debt financing.
GameStop’s market cap at the time of the offer was roughly $11 billion. It is proposing to buy a company five times its size. This is the PE playbook executed by a meme stock with a retail army watching.
The Compensation Connection
In January 2026, GameStop’s board granted CEO Ryan Cohen a performance-based stock option award covering over 171 million shares at a strike price of $20.66. The award pays nothing unless GameStop hits specific market cap and EBITDA milestones. The first tranche vests at $20 billion market cap and $2 billion cumulative EBITDA. Additional tranches vest at each $10 billion increment in market cap and $1 billion increment in EBITDA, up to $100 billion market cap and $10 billion cumulative EBITDA. Full vesting is worth approximately $35 billion.
Cohen receives no salary, no cash bonuses, and no guaranteed equity. The entire package is contingent on growth targets.
CNBC’s Becky Quick asked Cohen directly whether he could reach these targets simply by acquiring other companies rather than growing organically. He did not give a clear answer. The compensation package includes provisions for the board to “equitably and proportionately” adjust milestones after acquisitions, but the filing does not define what that means in practice.
The incentive structure matters. GameStop’s current market cap is roughly $11 billion. Reaching $100 billion through organic growth of a video game retailer is not a realistic path. Acquisitions are the only way to get there. Each acquisition creates goodwill. Goodwill inflates book value and total assets. A larger company commands a larger market cap. The milestone targets get closer.
This is the same PE flywheel described above, but with a personal $35 billion payout attached to the cycle.
The Playbook Made Visible
For 25 years, this system operated in the background. PE firms used goodwill to inflate portfolio company balance sheets before exits. Tech giants used it to absorb startup premiums without earnings drag. The FASB maintained the rules while staffed by the people who benefited from them. $5.6 trillion in goodwill accumulated on US balance sheets. Nobody put the pieces together in public because the people doing it had every reason to keep it quiet.
GameStop is not keeping it quiet. RC is trolling them on X. A meme stock with millions of retail investors watching is proposing to execute one of the largest leveraged buyouts ever attempted, creating tens of billions in goodwill on a company that currently has none, while its CEO holds a compensation package that pays $35 billion if the resulting entity gets big enough.
Every mechanic described here is in play. The goodwill inflates book value. Book value counts in fundamentally-weighted baskets and index products. If GME is in any such products, the rebalancing is mechanical. The CEO’s compensation is tied to market cap milestones that acquisitions can reach. The accounting rules make the goodwill permanent and cost-free on the income statement.
The system that was built to benefit private equity and big tech in private is now being used by a meme stock in public. That is not a bug in the thesis, That is the thesis.
🎤🫳
If the rules allow it for Blackstone, KKR, Google, and Microsoft, they allow it for GameStop. The fact that it looks absurd when a video game retailer does it is the point. It was always absurd. It was just never this visible.
NFA 🚀 🌖

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