eBay Rejects GameStop Takeover Bid: ‘Neither Credible Nor Attractive’

EBay has officially rebuffed GameStop’s unsolicited $56 billion takeover proposal, characterizing the bid as “neither credible nor attractive.” The online marketplace giant’s board of directors, after a thorough review supported by independent advisors, concluded that the offer did not meet their standards for a viable transaction.

The audacious bid, unveiled by GameStop CEO Ryan Cohen just last week, sought to acquire eBay for $125 per share in a deal structured as a combination of cash and stock. This move marks a significant divergence in scale, as eBay boasts a market capitalization of just over $48 billion, dwarfing GameStop’s roughly $10.3 billion valuation.

“The Board, with the support of its independent advisors, has thoroughly reviewed your proposal and has determined to reject it,” stated Paul Pressler, chairman of eBay’s board, in a formal letter. He further elaborated, “We have concluded that your proposal is neither credible nor attractive.” GameStop has not yet responded to requests for comment.

EBay cited several critical concerns regarding GameStop’s offer, prominently featuring “the uncertainty regarding your financing proposal.” Beyond financial apprehensions, the company also highlighted operational risks and the substantial debt burden that would be incurred by the proposed merger.

While Cohen had indicated that GameStop had secured a $20 billion financing commitment from TD Securities, a division of TD Bank, and possessed approximately $9 billion in cash reserves, a significant funding gap persists. The financing letter, a non-binding document released by eBay, stipulated that TD’s confidence was contingent upon the combined entity maintaining an investment-grade credit profile from at least two of the top three credit rating agencies. Previous reports indicated that this crucial condition was indeed part of TD’s letter.

Adding to the skepticism, Moody’s Ratings had previously assessed the proposed acquisition as “credit negative” for eBay, citing the substantial increase in leverage inherent in the proposed deal structure. The sentiment among Wall Street analysts has largely mirrored this cautious outlook. Many have publicly expressed doubts about the feasibility of the deal, pointing to a lack of substantial synergies between the two disparate businesses. Cohen’s recent appearance on CNBC’s “Squawk Box” offered limited clarity on the financing strategy, characterized by some as awkward and at times combative.

“We are offering half cash, half stock, and we have the ability to issue stock in order to get the deal done,” Cohen had stated, directing interested parties to GameStop’s website for further details. He also indicated a willingness to bypass eBay’s management and present the offer directly to shareholders should the company refuse to engage.

In his proposal, Cohen outlined a vision for operating eBay with “a lot more efficiency,” which included plans for workforce reductions and a significant trimming of marketing expenditures, which he implied had become bloated under CEO Jamie Iannone without yielding proportional user growth.

A particularly intriguing aspect of Cohen’s proposal involved leveraging GameStop’s approximately 1,600 U.S. retail stores. He suggested these locations could serve as hubs for authenticating and fulfilling eBay orders, as well as acting as centers for live commerce initiatives.

EBay’s response, however, underscored the board’s confidence in its current leadership and the tangible progress made over recent years. “We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” the company affirmed. EBay’s stock has seen a 24% year-to-date increase, reflecting ongoing success in its turnaround efforts under Iannone. The company has strategically concentrated on “focus categories” such as trading cards, collectibles, and high-end used goods, aiming to carve out a distinct niche against larger competitors like Amazon.

“We are offering half cash, half stock, and we have the ability to issue stock in order to get the deal done,” Cohen said. “But the full details of the offer are on our website. We’ll see what happens.”

Cohen said he was prepared to take the offer directly to shareholders if eBay declined to engage.

In his proposal, Cohen pledged to operate eBay “a lot more efficiently,” including trimming head count and slashing its marketing spend, which he suggested had become bloated under CEO Jamie Iannone without leading to user growth.

He also said GameStop’s 1,600 U.S. retail stores could be used to authenticate and fulfill eBay orders, and serve as hubs for live commerce.

EBay wrote in its letter that it remains confident in its current management team and that its business has “delivered meaningful results” over the past several years.

“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders,” eBay wrote.

The company, whose shares are up 24% year to date, has been in the middle of a turnaround effort. Under 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.