GameStop CEO Ryan Cohen's $56 billion takeover bid for eBay, announced over the weekend, has met with widespread skepticism from investors and analysts. The video-game retailer, worth roughly $12 billion, is attempting to buy a company nearly four times its size, offering a mix of half cash and half stock. With only about $9 billion in cash on hand and $4.2 billion in debt, financing remains the key concern.
Cohen has pointed to a $20 billion debt financing commitment from TD Securities and a 5% stake already built in eBay. He argues he can apply the same cost-cutting playbook used at GameStop to boost eBay's profitability and leverage GameStop's 1,600 U.S. stores as a physical network to compete with Amazon. Yet eBay shares rose just 6% to $110 in early trading, far below the $125-per-share offer price, signaling deep market doubt the deal will close.
GameStop shares fell 2% on the news. eBay said it is reviewing the offer, including whether GameStop can deliver a "binding, actionable proposal." Morgan Stanley analysts noted the market needs more funding details, calling an all-stock alternative a "hard sell" given the fundamentally different business models.
Once a competitor to Amazon, eBay has repositioned itself as a destination for antiques, rare sneakers, and high-end fashion. Its stock is up nearly 20% year-to-date after a strong earnings report.
Cohen, a central figure in the 2021 meme-stock frenzy and founder of Chewy, has said he is ready to go hostile. The deal could be the largest leveraged buyout ever, surpassing the $55 billion Electronic Arts transaction. Investor Michael Burry, known from "The Big Short," criticized the strategy as "pedestrian," warning it would lead to more debt and shareholder dilution.