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GameStop tried to buy a company four times its own size. eBay said no, calling the offer ‘Neither Credible Nor Attractive.’
eBay’s board rejected GameStop’s $56 billion takeover bid on Tuesday, calling the unsolicited offer “neither credible nor attractive.” The rejection was delivered in a letter from eBay Chairman Paul Pressler directly to GameStop CEO Ryan Cohen.
eBay’s board cited “uncertainty” around the financing plan, the operational risks involved, and concerns about GameStop’s governance and executive incentives as reasons for turning it down.
GameStop had submitted a nonbinding offer on May 3 to acquire eBay for $125 per share, supposedly comprising 50% cash and 50% GameStop common stock, valuing eBay at $55.5 billion. GameStop did not immediately respond to requests for comment.
This deal was unusual from the moment it was announced. GameStop itself is currently valued at around $11 billion, meaning it was attempting to acquire a company roughly four to five times its own size. That kind of move almost never works without airtight financing, and that was exactly the problem here.
Ryan Cohen said the retailer had secured a commitment letter from TD Bank for up to $20 billion in debt financing. Combined with roughly $9 billion in cash on GameStop’s balance sheet, the retailer still faced a significant funding shortfall.
Making things worse, that TD Bank commitment had a catch. The financing was contingent on the combined company maintaining an investment-grade credit rating. Moody’s said last week the deal would be credit negative for eBay, which would almost certainly blow that condition out of the water.
Cohen’s pitch wasn’t completely without logic. GameStop argued its approximately 1,600 U.S. stores could become drop-off and shipping locations, with one proposal including live sales broadcasts from GameStop locations featuring eBay products. The goal, broadly, was to build something that could genuinely compete with Amazon — a problem both companies share.
Cohen argued that by combining GameStop and eBay, he could cut costs and find collaborations to create a much bigger enterprise, boosting eBay’s profitability by replicating GameStop’s cost-cutting drive and turning the physical retail network into a competitive asset.
Wall Street wasn’t buying it. Most analysts said the two businesses are too different to merge cleanly. eBay earns fees by connecting buyers and sellers online without holding inventory. GameStop buys wholesale and resells through stores. The overlap is thin.
eBay’s rejection wasn’t just defensive. The company made a point of saying it doesn’t need saving. eBay, whose shares are up 24% year to date, has been in the middle of a turnaround effort. Under CEO Jamie Iannone, eBay has doubled down on so-called “focus categories,” like trading cards, collectibles, and used luxury goods, as a way to differentiate itself from larger rivals like Amazon.
eBay has 136 million users who spend $80 billion a year on the platform. Pressler made it clear in his letter that the board is confident in the current team and sees no reason to hand the keys to a meme-stock retailer.
What Happens Next
The rejection could lead to a hostile bid, as Cohen had said he was willing to take the offer directly to eBay shareholders, possibly by calling a special meeting. That would mean a proxy fight — trying to replace eBay’s board with one that would approve the deal. It’s messy, expensive, and rarely works when the financing case is this shaky.
Not everyone in Cohen’s corner is on board either. Michael Burry, of “The Big Short” fame, sold his entire stake in GameStop after the offer was announced, warning that it would saddle the company with debt and dilute shareholders.
As of Tuesday morning, eBay stock fell 1% to $107 before the bell, while GameStop was down 4%. The market is showing believe in this deal, and eBay’s rejection changes very little.
The ball is now in Ryan Cohen’s court. Will he push harder, or fold?
