eBay Rejects Ryan Cohen’s $56B Takeover Offer

eBay’s board formally rejected GameStop CEO Ryan Cohen’s unsolicited $56 billion offer on Tuesday. Chairman Paul Pressler wrote to Cohen that the $125-per-share proposal “is neither credible nor attractive,” citing financial and strategic concerns.

The bid valued eBay at about a 20% premium to its recent trading price. GameStop’s market capitalization is roughly $10 billion to $12 billion, while eBay is about four times larger. Cohen proposed combining eBay’s online marketplace with GameStop’s roughly 1,600 U.S. retail stores.

Cohen presented a financing plan that included a $20 billion commitment from TD Securities, but the commitment was non-binding and required the combined company to maintain an investment-grade credit profile from at least two of the three major ratings agencies. eBay holds roughly $9 billion in cash. Even including the conditional letter and eBay cash, the financing appeared to fall short of the $56 billion purchase price.

At least one ratings agency described the transaction as “credit negative” for eBay because of the additional leverage the structure would add. Cohen described planned funding as “cash and stock” but did not provide further specifics.

Cohen proposed using GameStop’s stores to authenticate goods, fulfill orders and support live commerce while applying cost-cutting measures to improve profitability. He has expressed interest in leading eBay, saying, “I’m passionate about eBay. I believe in eBay’s business.”

In its letter the board listed six reasons for rejection: eBay’s standalone prospects, uncertainty about the financial proposal, potential impacts on long-term growth, leverage and operational risks for a combined company, valuation concerns and GameStop’s governance and executive incentives. The board described eBay as “a strong, resilient business” and noted the company’s stock is up about 24% year-to-date.

Investor reaction included the sale of a large GameStop stake by a prominent investor, who cited worries the deal could increase debt and dilute existing shareholders. Some analysts questioned whether a smaller buyer could finance the takeover of a larger company without a clear funding plan.

Cohen may seek to take the offer directly to eBay shareholders by calling a special meeting to bypass the board. That approach would require persuading eBay’s shareholders to support the transaction. Neither eBay nor Cohen has announced further steps.