eBay on Tuesday declined an approach from GameStop that would have valued the company at about $56 billion, saying it had questions about whether the smaller bidder could secure the financing necessary to complete the transaction. The offer, which was structured as roughly half cash and half stock, was made by GameStop - a videogame retailer described in the offer as a roughly $12 billion company - for a target that the bidder is nearly four times its size by market value.
The rejection came as eBay highlighted the progress of its own turnaround and recent improvements in growth, presenting those gains as part of the rationale for turning down the overture. eBay shares have been trading roughly $20 below the $125-per-share level referenced in GameStop’s proposal.
GameStop Chief Executive Ryan Cohen has signaled he is prepared to bypass eBay’s board and take the offer directly to eBay’s shareholders, a move that could escalate the situation into a hostile bid. Analysts and market participants have expressed skepticism about whether the proposed mix of cash and stock from a substantially smaller company would be consummated.
The approach has also prompted reactions among GameStop investors. Notably, investor Michael Burry sold his entire stake in GameStop after the bid and criticized the transaction strategy as "pedestrian," citing concerns about the potential debt burden and dilution for shareholders. Burry previously had compared Cohen to Warren Buffett but has since voiced opposition to this deal’s structure.
Cohen has argued that he could transfer a cost-cutting playbook from GameStop to eBay to lift profitability. He has also proposed that GameStop’s roughly 1,600 U.S. stores could be used as a physical network to help eBay compete more effectively with larger retail rivals. As part of his pitch, Cohen referenced up to $20 billion of potential debt financing from TD Securities and cited GameStop’s ability to issue stock as components of how the transaction might be funded.
eBay’s explicit doubts over the financing plan were central to its rejection. While the target company emphasized its momentum and recovery, it did not accept the offer as presented, setting the stage for what could become an intensified campaign should GameStop press on with a shareholder-directed or hostile effort.
Market context
- The offer was approximately $125 per share, and eBay shares were trading about $20 below that level at the time referenced in the bid.
- GameStop’s proposal combined cash and stock as the consideration.
- Investor reactions have been mixed; at least one high-profile shareholder sold holdings and criticized the plan.