GameStop Shares Decline 6.5% Following eBay Acquisition Bid Report

GameStop's Ambitious Takeover Bid for eBay Sparks Investor Skepticism

On Monday, May 4, GameStop's share price plummeted by 6.5% to a day's low of $24.80 on the NYSE, following the company's unprecedented proposal to acquire e-commerce giant eBay for $55.5 billion. This bold move has drawn skepticism from investors and analysts, triggering a wave of selling after the opening bell.

The proposed takeover bid, which would see GameStop use around $9 billion in cash and a debt load of $4.2 billion to acquire eBay, has sent eBay shares soaring by 7% to a day's high of $111. The deal, which would mark a rare instance of a smaller company attempting to acquire a much larger entity, has raised eyebrows among industry experts.

GameStop, a nearly $12 billion video-game retailer, has been quietly accumulating a stake in eBay and is now offering to buy it at $125 per share. The company claims to have secured a commitment from TD Bank to provide around $20 billion in debt financing for the deal. If successful, the acquisition would see GameStop's CEO, Ryan Cohen, become CEO of a combined company that would utilize GameStop's physical stores as hubs for eBay's authentication and fulfillment services.

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According to a letter to eBay, Cohen promised to deliver $2 billion in annualized cost reductions within 12 months of closing the deal. The reductions would be achieved through cuts to eBay's sales and marketing budget, as well as consolidation of general and administrative functions. Cohen also estimates that these reductions would drive eBay's diluted earnings per share from $4.26 to $7.79 in year one.

Key Statistics

• GameStop's share price drop on Monday, May 4: 6.5%
• eBay's share price increase on Monday, May 4: 7%
• Amount of cash GameStop would use to acquire eBay: $9 billion
• Debt load of GameStop: $4.2 billion
• Proposed deal value: $55.5 billion
• eBay's current market value: $46.2 billion

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eBay has stated that it is reviewing the offer, including GameStop's ability to deliver a "binding, actionable proposal." The two companies have different mainstay businesses, with eBay earning fees by connecting buyers and sellers online without holding inventory, while GameStop is a traditional retailer that buys goods wholesale and resells them through physical stores.

GameStop's stock has struggled to gain momentum over the last three months, largely remaining stagnant. The company's stock has been highly volatile, rallying sharply in some months, only to surrender those gains in the following months, and then reversing losses again. This cycle has continued almost consistently since 2021.