By Michaela Gordoni
GameStop placed an unsolicited bid of $56 billion to take over eBay’s empire on Monday.
It submitted a nonbinding proposal to acquire 100% of eBay for $125.00 per share. The board of eBay acknowledged receipt of the offer, saying it will “carefully review and consider” it, Variety reported.
All the while, GameStop’s market capitalization is under $12 billion. Its shares were down by over 10% on Monday, Yahoo! Finance reported. It does have $20 billion committed by TD Bank and $9.4 billion in cash and liquid investments, including bitcoin, as of Jan. 31.
CNN Business said this deal isn’t like most normal business acquisition deals, and the math doesn’t quite add up.
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GameStop CEO Ryan Cohen discussed the deal on CNBC on Monday. The recap reads, “Cohen offered limited clarity on the structure during what at times was a combative and awkward interview, repeatedly directing viewers to the company’s website for details.”
Cohen said, “We are offering half cash, half stock, and we have the ability to issue stock in order to get the deal done. But the full details of the offer are on our website.” He added that he’d welcome eBay acquiring GameStop because “I have the same obligation to my shareholders.”
CNBC’s Ross Sorkin had tried to press Cohen for more details, which Cohen evaded.
To issue new shares and dilute stock value isn’t usually seen as an attractive thing in business acquisitions.
GameStop already has a 5% economic stake in eBay “through derivatives and beneficial ownership of common stock.”
GameStop says Cohen owns 9% of GameStop and “receives no salary, no cash bonuses, and no golden parachute.” If GameStop buys eBay, Cohen “will be compensated solely based on the performance of the combined company.”
eBay received the proposal by surprise. It had no prior conversations with GameStop about this matter.
Yahoo! Finance notes that GameStop’s stock has lagged over 38% over the last five years. And as for eBay? Its shares are up more than 55% from a year ago.
GlobalData retail analyst Neil Saunders compared the deal to “a David trying to take over a Goliath in order to buy David relevance…eBay is a successful business that has a very clear proposition, a clear rationale for existence,” Saunders said. “Whereas I feel that GameStop is a company that is sort of grappling with a reason to be around.”
If analysts are this confused, then the odds are not in GameStop’s favor.
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