GameStop is reportedly preparing to make an acquisition offer for eBay as its CEO, Ryan Cohen, strategizes on plans to significantly enhance the videogame retailer’s market value. According to a Friday report from the Wall Street Journal, GameStop, which currently holds a market value of nearly $12 billion, is quietly accumulating a stake in eBay, whose market capitalization stands at around $46 billion. Following the news, shares of eBay surged approximately 14% in extended trading hours, while GameStop’s shares rose by 4%.
Cohen, who is the largest investor in GameStop and became CEO in September 2023, aims to elevate the company’s market value more than tenfold. The potential offer for eBay may materialize as soon as later this month, though specific details about the bid remain undisclosed. If eBay does not respond positively to the offer, there is a possibility that Cohen could present the proposal directly to eBay’s shareholders.
This potential acquisition marks a deviation from typical merger and acquisition strategies, as it is uncommon for a company of GameStop’s size to target one approximately four times its own market valuation. Such deals generally require significant debt, stock issuance, or a combination of both, with expectations that future earnings from the merged entity will validate the financial outlay.
Cohen, who joined GameStop’s board in January 2021, has been pivotal in guiding the company through challenging times marked by a shift towards online shopping and digital purchases, which resulted in the closure of numerous physical stores. Recently, the company reported a 14% decline in revenue, amounting to $1.10 billion for the holiday quarter.
In January, GameStop announced a substantial compensation package for Cohen, valued at roughly $35 billion, contingent on his ability to boost the company’s market value to $100 billion and achieve $10 billion in cumulative performance EBITDA.
The stock performance of GameStop has seen a decline from its peak levels in 2021, a period during which the company became a favorite among retail investors amidst the meme-stock phenomenon. Meanwhile, eBay has experienced a 19% increase in its stock value this year, projecting second-quarter revenue above Wall Street forecasts, driven by listings of collectibles, motor accessories, and live-streamed auctioning on its platform.
Both GameStop and eBay did not respond immediately to requests for comment regarding the potential acquisition.
