GameStop, the video game retailer that became a household name by making hedge funds cry during the pandemic, has decided to try its hand at something even more audacious: offering $55.5 billion (£40.9bn) to buy eBay. The unsolicited cash-and-stock proposal values eBay at $125 a share, which is $20 more than where its stock closed on Friday. You know, just a casual $20 premium, no big deal.
In a letter to eBay, GameStop CEO Ryan Cohen outlined a plan to save $2 billion within a year of completing the deal - mostly by slashing $1.2 billion from eBay's sales and marketing budget. Cohen, who would become CEO of the combined company, made a noble pledge: he would take no salary, no cash bonuses, and no golden parachute, choosing instead to be compensated solely based on performance. So essentially, he's betting the farm on making this work.
GameStop, which currently has a market valuation of about $11.9 billion, has secured a commitment letter from TD Securities for around $20 billion in debt to help fund the acquisition. The company argued that eBay's heavy spending on sales and marketing hasn't exactly delivered a flood of new users for what it described as a "marketplace with near-universal brand recognition." In other words, everyone knows eBay exists; they just don't need more ads about it.
Shares of eBay jumped more than 13% in after-hours trading when news broke, suggesting investors are at least intrigued by the idea. GameStop still operates about 1,600 stores in the US, which Cohen believes could serve as a national network for eBay's "live commerce" and other operations. Because nothing says cutting-edge e-commerce like a brick-and-mortar store in a suburban strip mall.
Cohen, who took the helm at GameStop in 2023, has been critical of the company's slow shift to e-commerce - which is a bit rich coming from a company that rose to fame during the pandemic as the poster child of meme stocks. Those were the days when retail investors, egged on by Keith Gill (aka Roaring Kitty), turned GameStop into a symbol of rebellion against Wall Street. The stock's wild ride helped coin the term "meme stock" and inspired similar volatility in shares of AMC Entertainment and BlackBerry.
Now GameStop is trying to buy one of the internet's original marketplaces. It's a bold move for a company with a fraction of eBay's market cap. But hey, if you're going to make an offer, might as well make it $55.5 billion and see what happens.