GameStop Makes Bold $56 Billion Play for eBay, Ready to Go Hostile

GameStop (GME) has proposed to buy eBay Inc. (EBAY) for approximately $56 billion in a cash-and-stock deal, with CEO Ryan Cohen stating he is prepared to take the bid directly to shareholders should eBay's board be unreceptive.

In a letter to eBay's board, Cohen offered to pay $125 per share in a 50-50 mix of cash and stock. Based on eBay's Friday close, the bid represents a premium of about 20%. eBay has a market capitalisation nearly four times larger than GameStop — approximately $46 billion versus GameStop's $12 billion — making the buyout bid an ambitious attempt.

GameStop has already built up a 5% stake in eBay through shares and derivatives, Cohen said in the letter. Cohen, who is also GameStop's largest investor, is pushing to boost the struggling videogame retailer's market value more than tenfold.

Strategic Rationale

Cohen told the Wall Street Journal that putting eBay and GameStop under one roof would create huge opportunities to improve earnings and cut costs. "It could be a legit competitor to Amazon," he said.

In the letter, Cohen stated that GameStop would cut $2 billion of eBay's annualised costs within 12 months of closing, increasing the company's earnings per share. GameStop's 1 600 US locations would give eBay a national network for authentication, intake, fulfilment, and live commerce, he added.

"eBay should be worth — and will be worth — a lot more money," Cohen said. "I'm thinking about turning eBay into something worth hundreds of billions of dollars."

Financing and Structure

Cohen said he has already lined up financial commitments, including a commitment letter for approximately $20 billion in debt from TD Securities, a subsidiary of TD Bank. GameStop had about $9.4 billion in cash and liquid investments as of 31 January, Cohen said, adding that the cash component of the deal would be funded from that and third-party equity and debt financing.

He may also seek backing from external investors, including Middle Eastern sovereign wealth funds, according to the WSJ report. Following the close, Cohen said he would serve as the CEO of the combined company.

Hostile Bid Threatened

Cohen told the Wall Street Journal he was prepared to pursue a proxy fight if eBay's board was not receptive to the proposal. The unsolicited offer was first reported by the Journal, citing an interview with Cohen.

Cohen, dubbed the "meme king" by retail traders for his role in the 2021 meme-stock frenzy and his outsized influence among individual investors on social media, has built a reputation for bold, unconventional bets that can move markets.

Company Context

A potential deal would upend the usual M&A playbook, as it is rare for a company to target one nearly four times its size. Such deals typically rely on substantial debt, stock issuance, or both — banking on future earnings of the combined company to justify the cost.

GameStop added Cohen to its board in January 2021 as the company struggled with a shift to online shopping and digital downloads. He later became CEO, pushing aggressive cost cuts that helped return the company to profitability. Despite his turnaround pledges, GameStop continues to grapple with structural shifts in the gaming industry, reporting a 14% drop in fourth-quarter revenue last month.

By contrast, eBay last week forecast second-quarter revenue above Wall Street estimates, banking on demand for collectibles, motor accessories, and live-streamed auctions.

eBay did not immediately respond to requests for comment on GameStop's offer.

Market Sentiment: 

The sentiment is highly sceptical, reflecting the enormous valuation gap and strategic mismatch between the two companies. GameStop's market capitalisation of $12 billion is less than a quarter of eBay's $46 billion, making this a classic "minnow swallows whale" proposal that would require massive debt financing — $20 billion committed, with additional equity and cash needed. The 20% premium to eBay's Friday close is reasonable, but whether eBay's board engages is doubtful given GameStop's declining core business (14% revenue drop) versus eBay's stable marketplace model. Cohen's track record — turning GameStop from a money-losing retailer to a cash-flush but shrinking company — is positive but not transformative. The proposal to cut $2 billion in costs within 12 months is aggressive and would likely face resistance from eBay's management and employees. The comparison to Amazon is aspirational at best. Trading at 1.5x forward sales, eBay is not obviously undervalued. The hostile threat adds pressure, but eBay's board has significant leverage. For GameStop, the deal would transform it into a much larger e-commerce player, but at the cost of massive leverage and integration risk. For eBay shareholders, the offer creates a floor valuation but an uncertain future under GameStop's control. The market will watch for eBay's formal response, potential competing bids, and whether Cohen can rally other shareholders. Overall, a bold but improbable bid that reflects Cohen's unconventional style more than realistic deal math.

Disclaimer:
This content has been generated using AI technology and is intended for informational purposes only. While efforts have been made to ensure accuracy and relevance, this text should not be considered professional advice or an official statement. Always verify information from authoritative sources before making any decisions. This is not financial advice.