eBay (NASDAQ:EBAY) has turned down a proposed $56 billion takeover offer from GameStop (NYSE:GME), citing concerns over the credibility and financing structure of the proposed transaction.
The bid would have seen GameStop — a company valued at roughly one-quarter of eBay’s size — attempt one of the most ambitious acquisitions in the retail and e-commerce sector in recent years.
“We have concluded that your proposal is neither credible nor attractive,” eBay said in its response to Ryan Cohen.
Potential for Hostile Bid Emerges
The rejection raises the possibility of a hostile takeover attempt after GameStop CEO Ryan Cohen indicated last week that he could bypass eBay’s board and take the proposal directly to shareholders if discussions failed to progress.
Shares of eBay traded around $107 in premarket activity, down approximately 1.1% and remaining well below the proposed offer price of $125 per share, suggesting investor skepticism over the likelihood of the deal being completed.
Financing Structure Faces Investor Scrutiny
The proposed acquisition was structured as a combination of cash and stock.
However, analysts and investors have questioned whether GameStop, with a market valuation of roughly $12 billion, could realistically finance a transaction valued at nearly four times its own capitalization.
Cohen has reportedly pointed to around $20 billion in potential debt financing from TD Securities, alongside the possibility of issuing additional GameStop shares, as key components of the financing package.
Michael Burry Exits Stake Following Bid Announcement
The proposal has also unsettled some existing GameStop investors.
Michael Burry, the investor known for his role in “The Big Short,” reportedly sold his entire GameStop position after the takeover proposal became public.
Burry reportedly described the acquisition strategy as “pedestrian” and expressed concerns about the potential debt burden and shareholder dilution that could result from the transaction.
Cohen Sees Opportunity to Challenge Amazon
According to Cohen, the rationale behind the proposed deal centers on applying his cost-cutting strategy to eBay while using GameStop’s approximately 1,600 U.S. retail stores to build a stronger physical commerce network.
The strategy is intended to create a business better positioned to compete with Amazon in both online and offline retail.