eBay has rejected a $56 billion takeover bid from the much smaller GameStop, citing doubts about financing and calling the proposal “neither credible nor attractive.” The decision was announced by eBay Chairman Paul Pressler in a statement.
eBay, which has roughly four times GameStop's market value, emphasized that its turnaround efforts under CEO Jamie Iannone have driven growth, with shares returning 201% since Iannone took the position six years ago. Pressler expressed confidence in the current management team's ability to sustain growth.
The rejection also highlighted concerns about GameStop's financing, the bid's impact on eBay's long-term growth, and the leadership structure of a potential combined entity. GameStop did not immediately respond to a request for comment.
GameStop CEO Ryan Cohen surprised Wall Street last week with the bid, which included a $20 billion debt financing commitment from TD Bank. Analysts and investors have doubted whether the half-cash, half-stock offer from the $12 billion video game retailer would close.
eBay shares have traded well below the offer price of $125 per share since the bid was made. On Tuesday, they fell 1.3% to $106.68, while GameStop shares dropped nearly 2%. Over the past 12 months, eBay's stock has climbed 56%, while GameStop's has fallen 18%.
Cohen, who has built a 5% stake in eBay, signaled he may take the offer directly to shareholders by calling a special meeting, though that requires a larger stake. He argued that combining GameStop and eBay could cut costs and create synergies.
Analysts noted eBay's EBITDA margin of 31% is three times higher than GameStop's 10%. Cohen claimed he could boost profitability by replicating GameStop's cost-cutting drive and using its 600 U.S. stores as a physical network to compete with Amazon.
The proposal has upset some GameStop investors. Michael Burry, known from “The Big Short,” sold his stake, warning it would saddle GameStop with debt and dilute share value. The deal has drawn attention in a robust M&A market and among retail investors, for whom Cohen is a hero since the 2021 short squeeze.
Source: www.aljazeera.com