EBay rejects GameStop’s $56bn bid as ‘not credible or persuasive’ | Business and Financial Issues

The CEO of GameStop Cohen, who has made a 5 percent stake in eBay, said that he could offer it directly to eBay owners.

EBay has rejected a $56bn takeover of the much smaller GameStop over financial concerns, calling the proposal “neither credible nor attractive”.

EBay, which has about four times the market value of GameStop, confirmed on Tuesday that its efforts under CEO Jamie Iannone have boosted growth, and its stock has returned 201 percent since Iannone took over the position six years ago.

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“We found your proposal to be neither credible nor attractive,” eBay chairman Paul Pressler said in a statement. “eBay’s Board is confident that the company, under its current management team, has the opportunity to continue to drive sustainable growth.”

He also expressed concerns about the GameStop bid, including its financial position, its impact on eBay’s long-term growth and the leadership of the potentially merged company.

GameStop did not immediately respond to a request for comment.

Last week, GameStop CEO Ryan Cohen surprised Wall Street with his bidwhich included a $20bn loan commitment from TD Bank.

Analysts and investors doubt whether a half, half stock in eBay from the video seller of $ 12bn will close.

EBay stock has been trading well below the offer price of $125 per share since it made its debut this month. It fell 1.3 percent Tuesday to $106.68, while GameStop fell nearly 2 percent in early trading. Over the past 12 months, eBay’s stock has risen 56 percent while GameStop’s has fallen 18 percent.

Cohen, who has made a 5 percent position in eBay, has indicated that he may be willing to take the offer to the owners of eBay, perhaps by calling a special meeting. This can be difficult because calling a meeting requires a large field.

A GameStop executive said he has a letter of credit from TD, based on the combined company receiving a financial grade. Moody said last week the deal would be debt-free for eBay. People familiar with the matter said eBay thinks it is unlikely that the combined company will be treated as a financial unit.

Cohen has said that by combining GameStop with eBay, they will be able to reduce costs and gain synergies to create a much larger business.

Analysts noted that eBay already has an EBITDA margin of 31 percent, three times higher than GameStop’s 10 percent.

Cohen said he could improve eBay’s profitability by adopting GameStop’s cost-cutting strategy and using its 600 US stores as a network to help eBay become a stronger rival to Amazon.

The proposed deal is attracting interest in the integrated and consumer market and among retail investors, who Cohen has championed since helping to squeeze out a short-term deal in 2021 that cost hedge funds such as Melvin Capital.

The offer has angered some GameStop retailers. Michael Burry, of The Big Short fame, sold his stock after the offering, warning that GameStop would incur debt and reduce the share price.

Both eBay and GameStop sell collectibles such as trading cards, but their main businesses are different. While eBay earns a fee by connecting buyers and sellers online without keeping inventory, GameStop buys most of its products and resells them through retail stores.

More for less money

In an interview with CNBC, Cohen shed some light on how GameStop will finance the deal.

When pressed, Cohen said the deal would be paid for in cash and stock.

Cohen has signed up to eBay’s board to serve as CEO of the combined company and will not receive a salary, cash bonus or golden parachute.

The 40-year-old billionaire built his fortune by launching and selling online food retailer Chewy, before making a big bet on GameStop when the retailer had a record low market value of $250m.