EBay has turned down a bold $56 billion US acquisition offer from the significantly smaller GameStop, citing concerns about the financing of the deal. The bid, comprising half cash and half stock, from the $12 billion US videogame retailer for a company almost four times its size, has faced skepticism from analysts and investors regarding its feasibility.
Since the offer was made earlier this month, eBay’s stock has been trading well below the proposed price of $125 US per share, currently at $107 US. GameStop’s stock also saw a decline of four per cent. EBay’s Chairman, Paul Pressler, expressed that the company finds the proposal neither credible nor attractive, emphasizing the board’s confidence in the current management team to sustain growth.
GameStop has not responded immediately to the rejection, hinting at a potential hostile bid as CEO Ryan Cohen previously mentioned the possibility of directly approaching eBay shareholders, potentially through a special meeting. Cohen claimed to have secured a $20 billion debt financing commitment from TD Bank, contingent on the combined entity obtaining an investment-grade rating. However, Moody’s raised concerns, stating that the deal could negatively impact eBay’s credit rating.
Cohen argued that merging GameStop with eBay could lead to cost reductions and synergies, creating a more substantial business entity. He proposed leveraging GameStop’s cost-cutting strategies and physical store network to enhance eBay’s competitiveness against industry giants like Amazon. The proposed deal has garnered significant attention in the mergers and acquisitions landscape and among retail investors.
The offer has not been well-received by all GameStop investors, with notable figures like Michael Burry selling their stakes in the company, citing concerns about increased debt and shareholder dilution. Despite both companies dabbling in collectibles like trading cards, their core business models differ, with eBay facilitating online transactions without inventory ownership, while GameStop operates physical stores selling goods acquired wholesale.
During an interview on CNBC, Cohen faced skepticism regarding the feasibility of GameStop’s acquisition of a company four times its size. Cohen’s responses regarding the financing of the $56 billion US acquisition drew further scrutiny due to lack of clarity. He asserted in a letter to eBay’s board that he would lead the combined company as CEO without a salary, bonuses, or golden parachutes.
Ryan Cohen, a 40-year-old billionaire, gained recognition through his ventures, including co-founding and selling Chewy and his involvement with GameStop. Appointed as GameStop’s chairman in 2021, Cohen assumed the CEO role following the departure of a former Amazon executive in June 2023.