GameStop is preparing offer for eBay, WSJ reports
GameStop's Strategic Move to Acquire eBay
Overview of the Potential Offer
May 1 (Reuters) - GameStop is preparing an offer for eBay as CEO Ryan Cohen pursues plans to boost the struggling videogame retailer's market value more than tenfold, the Wall Street Journal reported on Friday.
Shares of eBay, which has a market capitalization of about $46 billion, soared about 14% in extended trading. GameStop gained 4%. The company has a market value of nearly $12 billion.
GameStop's Stake in eBay
GameStop has been quietly building a stake in eBay's shares ahead of a potential offer, the report said, citing people familiar with the matter.
Possible Approaches to the Acquisition
If eBay is not receptive, Cohen could decide to take the offer directly to the e-commerce company's shareholders, the Journal said.
Details of the potential offer, which could be submitted as soon as later this month, could not be learned, the report added.
Responses from Involved Parties
Cohen, the largest investor in GameStop, and the companies did not immediately respond to Reuters requests for comment.
Implications and Industry Context
Unusual Nature of the Deal
A potential deal would upend the usual M&A playbook. It's rare for a public company to target one nearly four times its size; such deals typically rely on heavy debt, stock issuance, or both - banking on future earnings of the combined company to justify the cost.
Ryan Cohen's Leadership and GameStop's Transformation
The billionaire investor, who joined the GameStop board in January 2021 and became the CEO in September 2023, has steered the company through a period that saw its return to profitability through aggressive cost cutting.
GameStop's Shift to Online Business
For years, GameStop has grappled with disruptions from a pivot to online shopping and digital purchases, forcing it to shutter many of its brick-and-mortar stores and focus on a web-based reinvention.
It reported a 14% drop in revenue to $1.10 billion for the holiday quarter.
Cohen's Compensation Package
GameStop in January unveiled a compensation package worth roughly $35 billion for Cohen, hinging on a turnaround that requires him to lift the company's market value to $100 billion and hit $10 billion in cumulative performance EBITDA (earnings before interest, taxes, depreciation and amortization).
The company's shares have slumped from the all-time highs hit in 2021, when it became a retail investor darling during the pandemic-era meme-stock rally.
eBay's Recent Performance
EBay, whose shares have risen over 19% this year, forecast second-quarter revenue above Wall Street estimates on Wednesday, betting on listings of collectibles and motor accessories as well as live-streamed auctions on its e-commerce platform.
(Reporting by Juby Babu in Mexico City, additional reporting by Echo Wang in New York; Editing by Tasim Zahid and Sriraj Kalluvila)
