eBay rejects GameStop's $56bn takeover bid as 'neither credible nor attractive'

eBay’s board on Monday rejected an unsolicited $56 billion takeover bid from GameStop, calling the proposal led by GameStop chief executive Ryan Cohen “neither credible nor attractive” and sending shares of the video-game retailer down as much as 12 per cent in extended trading.

The bid, disclosed in an eBay statement on Monday afternoon, offered $125 per share — a 20 per cent premium to eBay’s previous close — split evenly between cash and GameStop stock. At that price, the proposal valued eBay at $56 billion, nearly five times GameStop’s own market capitalisation of $10.3 billion. It would have ranked among the largest unsolicited takeover attempts in corporate history, eclipsing Elon Musk’s $44 billion Twitter acquisition by a wide margin.

Chairman Paul Pressler delivered the board’s verdict in a one-sentence letter to Cohen. “We have concluded that your proposal is neither credible nor attractive,” Pressler wrote.

Three obstacles, the board said, made the bid unworkable. Start with the arithmetic: $28 billion of the offer was to be paid in GameStop equity — stock from a company worth $10.3 billion. Even the cash half, at roughly $28 billion, was undercooked. GameStop held about $9 billion of cash and had secured a $20 billion debt financing commitment from TD Securities. That left a gap the board called unexplained. Then there’s the operational question: how would GameStop, a video-game retailer with no marketplace experience at scale, run a platform with 132 million active buyers without destroying it? Finally, governance. Cohen, GameStop’s largest shareholder, would control the merged entity outright, a structure the board said exposed minority investors to risk they had not signed up for.

GameStop shares had surged more than 15 per cent during Monday’s regular session on speculation about the bid.

They reversed sharply after the rejection, falling 9.4 per cent in after-hours trade.

Cohen defended the proposal in an interview with CNBC. “We are offering half cash, half stock, and we have the ability to issue stock in order to get the deal done,” he said. “But the full details of the offer are on our website.”

The market was not buying it. eBay’s own stock slipped 1.2 per cent after hours to roughly $107, leaving it well below Cohen’s $125 offer price and signalling investors saw almost no probability of a deal materialising.

The financing gap

At the centre of eBay’s rejection was the sheer mismatch between GameStop’s balance sheet and the $56 billion price tag. GameStop closed Monday with a market cap of $10.3 billion. The offer required it to raise more than five times its own equity value, using a structure where half the consideration was its own stock — essentially asking eBay shareholders to accept payment in the bidder’s inflated paper.

Even the cash portion assumed $20 billion in debt financing from TD Securities. But Cohen’s letter, eBay noted, did not specify who else was in the lending syndicate. It did not say whether the debt was underwritten. And it did not explain what would happen if GameStop’s share price — the other half of the consideration — declined further.

These are not academic questions. A merger of this size, funded largely by debt and an acquirer whose stock doubles as deal currency, would rank among the most leveraged takeovers in corporate history. The board, in unusually blunt language for a deal rejection, described the proposal as having “no committed financing with terms we can evaluate.”

Michael Burry, the investor who first identified GameStop as a short-squeeze target in 2021 and whose Scion Asset Management has since moved on, weighed in on social media with a single line. “Never confuse debt for creativity.”

GameStop’s own transformation under Cohen has been uneven. He took over as chairman in 2021 and became chief executive in 2023, pivoting the company away from physical retail toward e-commerce and, more recently, toward using its cash reserves for dealmaking. The eBay bid is the most audacious move yet. GameStop ended last quarter with roughly $9 billion in cash and marketable securities, a war chest built in part through equity offerings during the meme-stock run of 2021, when retail traders briefly pushed the company’s valuation past $30 billion.

What happens next

Cohen has not withdrawn the bid. In the CNBC interview, he left the door open to a higher offer or a revised structure.

But the board’s language — “neither credible nor attractive” — leaves little room for friendly negotiation. No competing bidder has emerged, and eBay gave no indication it was running a sale process. One person familiar with the matter told Bloomberg that Cohen had approached eBay privately several weeks earlier and was rebuffed then, too. Monday’s public letter was his second attempt.

For eBay, attention now returns to its own restructuring under chief executive Jamie Iannone. The company has been cutting costs and refocusing on its core marketplace after divesting its classifieds unit and StubHub. Its most recent quarterly results showed gross merchandise volume of $18.6 billion, flat year on year, but operating margins expanded as Iannone’s cost programme took hold. The Cohen bid, however spectacular, is unlikely to distract management from that course — unless GameStop’s founder can make the numbers work.