Meme stock GameStop makes $71 billion bid for eBay in bid to rival Amazon

NEW YORK - GameStop is proposing to buy eBay for about US$56 billion (S$71.2 billion) in a bold attempt by chief executive Ryan Cohen to take over a storied e-commerce name several times larger.

GameStop – once a stock market minnow that shot to fame during a meme-stock frenzy five years ago – offered US$125 per share in cash and stock for the online retailer, or about a 20 per cent premium to its close on May 1.

At US$46 billion as at May 1, eBay has a market capitalisation nearly four times larger than that of GameStop at US$12 billion, making the buyout bid an ambitious attempt.

Mr Cohen told The Wall Street Journal that he was prepared to pursue a proxy fight if eBay’s board was not receptive to the proposal.

GameStop, which has built a roughly 5 per cent stake in eBay, said it has secured a commitment from TD Bank to provide about US$20 billion of debt financing to help bankroll the deal.

Mr Cohen, who is pushing to boost the struggling video game retailer’s market value more than tenfold, told the Journal that putting eBay and GameStop under one roof would create huge opportunities to improve earnings and cut costs.

“eBay should be worth – and will be worth – a lot more money,” he told the paper. “I’m thinking about turning eBay into something worth hundreds of billions of dollars.”

“It could be a legit competitor to Amazon,” he said.

Bloomberg Intelligence analysts Poonam Goyal and Sydney Goodman said in a note on May 1: “Though the companies overlap in collectibles and resale, we see low probability of a deal. Any credible offer would require substantial dilution and introduce meaningful execution risk.”

Mr Cohen said in a letter to shareholders that GameStop would cut US$2 billion of eBay’s annualised costs within 12 months of close, resulting in an increase in the company’s earnings per share.

GameStop’s 1,600 US locations would give eBay a national network for authentication, intake, fulfilment and live commerce, he added.

Mr Cohen, dubbed the “meme king” by retail traders for his role in the 2021 meme-stock frenzy and his outsized influence among individual investors on social media, has built a reputation for bold, unconventional bets that can move markets.

He joined GameStop’s board in January 2021 as the company struggled with a shift to online shopping and digital downloads, and later became CEO, pushing aggressive cost cuts that helped return the company to profitability.

Once a staple for in-store gamers, the bricks-and-mortar retailer was hit hard during the Covid-19 pandemic when players moved online.

GameStop soared to global prominence in 2021 when an army of retail investors bought the stock after it was squeezed by hedge fund short-sellers. Its shares soared more than 1,700 per cent at the time.

Despite Mr Cohen’s turnaround pledges, the company continues to grapple with structural shifts in the gaming industry. GameStop reported a 14 per cent drop in fourth-quarter revenue in April.

In contrast, eBay, which has grown from its humble beginnings in 1995 as a hobby for entrepreneur Pierre Omidyar, last week forecast second-quarter revenue above Wall Street estimates, banking on demand for collectibles and motor accessories as well as live-streamed auctions. REUTERS, BLOOMBERG