EBay (EBAY.O) on Tuesday rejected an ambitious $56 billion takeover bid from the much smaller GameStop (GME.N) on doubts over the financing of the deal, while underscoring its turnaround efforts that have boosted growth.
Analysts and investors have doubted whether the half-cash, half-stock bid from the $12 billion videogame retailer for a company nearly four times its market value would close.
EBay stock has been trading far below the offer price of $125 per share since the bid was made earlier this month. It fell 1% to $107 before the bell, while GameStop was down 4%.
"We have concluded that your proposal is neither credible nor attractive," eBay chairman Paul Pressler said. "eBay's Board is confident the company, under its current management team, is well-positioned to continue to drive sustainable growth."
GameStop did not immediately respond to a request for comment.
The rejection could lead to a hostile bid as GameStop CEO Ryan Cohen had said he was willing to take the offer directly to eBay shareholders, possibly by calling a special meeting.
Cohen has claimed that he has a $20 billion debt financing commitment letter from TD Bank, but it is contingent on the combined company having an investment-grade rating. Moody's said last week the deal would be credit negative for eBay.
Cohen has also argued that by combining GameStop and eBay he could cut costs and find synergies to create a much bigger enterprise.
He said he could boost eBay's profitability by replicating GameStop's cost-cutting drive and use its 600 U.S. stores into a physical network to help turn eBay into a tougher rival to Amazon (AMZN.O).
The proposed deal is drawing attention in a robust mergers and acquisitions and among retail investors, for whom Cohen has been a hero since he helped rally a short squeeze in 2021 that hammered hedge funds such as Melvin Capital.
The offer has also irked some GameStop investors. Michael Burry, of "The Big Short" fame, sold his stake in the company after the offer, warning that it would saddle GameStop with debt and dilute shareholders.
Both eBay and GameStop sell collectibles such as trading cards but their mainstay businesses are different. While eBay earns fees by connecting buyers and sellers online without holding inventory, GameStop buys goods wholesale and resells them through physical stores.
COHEN'S AWKWARD CNBC INTERVIEW
From the start, Wall Street reacted with surprise and suspicion to Cohen's offer, asking how GameStop could swallow a company four times its size.
In an interview on CNBC, Cohen, dressed in a black leather jacket and T-shirt, did not offer much explanation on how GameStop would finance the $56 billion purchase price.
When pressed, Cohen said the deal would be paid for with cash and stock. His short answer prompted awkward silences in the interview.
Cohen wrote to eBay's board that he would serve as the combined company's CEO and would take no salary, cash bonuses or golden parachute.
The 40-year-old billionaire cemented his fame and fortune by co-founding and then selling online pet foods retailer Chewy and then by making a big bet on GameStop at a time the retailer had a market valuation of $250 million.
Cohen was appointed GameStop's chairman in 2021 and assumed the CEO role after his handpicked CEO, a former Amazon executive, was fired in June 2023.
