eBay has rejected a $56 billion takeover offer from GameStop, saying the proposal is not credible or attractive enough for shareholders.
The bid, which was made earlier this month, offered $125 per share in a half-cash, half-stock deal. But analysts and investors had already questioned whether GameStop, a much smaller video game retailer valued at around $12 billion, could realistically buy a company nearly four times its size.
eBay shares have continued to trade below the offer price, showing that investors were not convinced the deal would go through. The stock slipped 1 percent to $107 before the market opened, while GameStop shares fell 4 percent.
eBay chairman Paul Pressler said the company’s board had reviewed the proposal and concluded that it was neither credible nor attractive. He added that eBay remains confident in its current management team and believes the company is well-positioned to continue growing on its own.
GameStop CEO Ryan Cohen had previously suggested that he could take the offer directly to eBay shareholders if the board refused to engage, raising the possibility of a hostile takeover attempt. Cohen has claimed that GameStop has a $20 billion debt financing commitment from TD Bank, but the financing depends on the combined company receiving an investment-grade credit rating. Moody’s recently warned that the deal would be credit negative for eBay.
Cohen has argued that combining GameStop and eBay could create a stronger retail and e-commerce business. He said GameStop could bring its cost-cutting approach to eBay and use its 600 U.S. stores as a physical network to help eBay compete more aggressively with Amazon.
The proposal has attracted major attention on Wall Street and among retail investors, many of whom still view Cohen as a key figure from GameStop’s 2021 meme-stock rally. But the bid has also frustrated some GameStop investors. Michael Burry, known for “The Big Short,” sold his stake in GameStop after the offer and warned that the deal could leave the company with too much debt while diluting existing shareholders.
Although eBay and GameStop both have exposure to collectibles such as trading cards, their core businesses are very different. eBay mainly earns fees by connecting buyers and sellers through its online marketplace, while GameStop buys products wholesale and resells them through physical stores.
Wall Street has been skeptical of the deal from the beginning. During a CNBC interview, Cohen gave few details about how GameStop would finance the $56 billion purchase. When asked about the funding, he only said the deal would be paid for with cash and stock, leading to an awkward exchange.
Cohen also told eBay’s board that he would become CEO of the combined company and would not take a salary, cash bonus, or golden parachute. The billionaire investor first built his reputation by co-founding Chewy and later became one of the most influential figures behind GameStop’s dramatic turnaround attempt.
If this article helped you, please consider supporting our work. Every small contribution keeps Abijita.com independent and running.
