Hostile bid: GameStop CEO Ryan Cohen offers $56bn for eBay

GameStop CEO Ryan Cohen has launched an unsolicited $56 billion hostile takeover bid for eBay, proposing a deal structure split evenly between cash and GameStop stock. The offer represents a 20 per cent premium to eBay's recent closing price and aims to transform the online marketplace into a direct competitor to Amazon. Cohen, who holds a roughly five per cent stake in eBay primarily through derivatives and common stock, stated that the proposal is directed at shareholders rather than management.

While eBay has confirmed receipt of the proposal and indicated its board would review it, Cohen noted he has not yet spoken with eBay's leadership. The transaction relies on GameStop's existing convertible debt, which stands at approximately $9.4 billion, and potential financing support from TD Bank and Middle Eastern sovereign wealth funds. Cohen has pledged to deliver $2 billion in annual savings within 12 months of closing the deal, arguing that eBay is under-earning and that significant costs can be cut.

Cohen described the venture as a binary outcome, stating it is "either going to be genius or totally, totally foolish." He also committed to taking no salary or cash bonus, with his compensation tied solely to the performance of the combined company. If the eBay board declines the offer, Cohen stated he would run a proxy fight to force the transaction through. His long-term target for the combined entity is a market value of hundreds of billions of dollars.

The context of the deal highlights a classic minnow-swallows-whale scenario, as eBay's market capitalisation is nearly four times that of GameStop. GameStop is currently described as a cash vehicle in search of a purpose, with revenue falling five per cent last year and dropping from $5.27 billion in 2023. Conversely, eBay is not distressed but is not thriving either, having seen net income fall 85 per cent over the same period.

Cohen's pitch argues that eBay has fat that can be cut, particularly regarding sales and marketing spend which currently stands at $2.5 billion. He pointed to GameStop's own financial turnaround as evidence that a mature consumer business can be revitalised. The deal's math depends heavily on GameStop stock holding its valuation long enough to close, a risk that remains significant given the company's recent share price movements.

Sources indicate that Cohen is not overselling the certainty of the outcome, acknowledging the high stakes involved in such a complex acquisition. The eBay board response is expected within weeks, leaving the future of the internet's oldest marketplace in a state of flux.