GameStop's $56 Billion Offer for eBay Rejected Outright

eBay has dismissed a $56 billion takeover offer from the much smaller GameStop, citing doubts about financial viability. The eBay board described the proposal as “unreliable and unattractive.”

eBay, with a market value roughly four times that of GameStop, also stressed that its restructuring under CEO Jamie Iannone has driven growth, with shares rising 201% since Iannone took the helm six years ago.

“We have concluded that your proposal is not credible and not attractive,” eBay Chairman Paul Pressler said in a statement. “The eBay board believes that the company, under its current management team, is well-positioned to continue driving sustainable growth.”

He also pointed to concerns about GameStop's offer, including financing, the impact on eBay's long-term growth, and the leadership structure of a potential combined company.

Last week, GameStop CEO Ryan Cohen surprised Wall Street with an offer that included a $20 billion debt financing commitment from TD Bank.

Analysts and investors have questioned whether the half-cash, half-stock bid from the $12 billion video game retailer can be completed.

eBay shares have traded below the offer price of $125 per share since the bid was made. They fell 1.3% on Tuesday to $106.68, while GameStop dropped nearly 2% in early trading. Over the past 12 months, eBay shares have risen 56%, while GameStop has fallen 18%.

Cohen, who has built a 5% stake in eBay, has signaled he may be willing to take the offer directly to eBay shareholders, possibly by calling a special meeting. That would be difficult, as it requires a larger shareholding.

The GameStop CEO said he has a debt financing commitment letter from TD Bank, contingent on the combined company achieving investment-grade ratings. Moody's said last week that the deal would be a negative credit signal for eBay. Sources said eBay believes it would be hard for a combined entity to be considered investment grade.

Cohen argued that by combining GameStop and eBay, he could cut costs and find synergies to create a much larger business.

Analysts noted that eBay already has an EBITDA margin of 31%, three times higher than GameStop's 10%.

Cohen said he could boost eBay's profitability by replicating GameStop's cost-cutting efforts and using its 600 U.S. stores as a physical network to help eBay become a stronger competitor to Amazon.

The proposed deal has drawn attention in a lively M&A market and among individual investors, where Cohen has been hailed as a hero since he helped orchestrate a short squeeze in 2021 that hurt hedge funds like Melvin Capital.

The bid has disappointed some GameStop investors. Michael Burry, famed for 'The Big Short,' sold his stake after the offer, warning it would burden GameStop with debt and dilute share value.

eBay and GameStop both sell collectibles such as trading cards, but their core businesses differ. eBay earns fees by connecting buyers and sellers online without holding inventory, while GameStop buys wholesale and resells through physical stores.

In an interview on CNBC, Cohen offered little explanation of how GameStop would finance the deal. Pressed, he said the deal would be paid for with cash and stock.

Cohen wrote to the eBay board that he would become CEO of the combined company and take no salary, cash bonus, or golden parachute.

The 40-year-old billionaire built his fortune by co-founding and later selling online pet food seller Chewy, before making a big bet on GameStop when the retailer had a much smaller market value of $250 million.