GameStop is no longer what it used to be. It’s not just that the prices they offer do not correspond to the reality of the video game market, but in general, it seems that they are only talked about to discuss controversies. But it’s for good reason. It seems they are always getting involved in a new one. This year had not been the case yet, but their CEO, Ryan Cohen, has decided to change that, with what is probably the most outlandish idea of the year: to buy eBay. And today we are going to tell you all about this odyssey.
A seamless plan
On May 3rd, the CEO of GameStop, the already mentioned Ryan Cohen, made a striking public promise. He promised that he was going to buy eBay. Putting on the table $56 billion, the market valuation of the company, his intention was to acquire the famous online store to create a new company capable of competing in volume and importance with Amazon. A very eye-catching goal that caught the attention of everyone. Not for his interest in buying eBay, but for how he intended to do it.
His explanation was simple. GameStop already owns 5% of eBay’s shares. His idea was to invest $28 billion in cash, of which $20 billion would come from TD Bank, the eleventh largest bank in the US, with which they would buy the board’s stakes. Then, they would issue another billion in shares and thus control 70% of the company.
The problem is that none of this makes sense. To begin with, GameStop’s valuation is at $12 billion, so investing $8 billion is illogical. How TD Bank or any other bank would invest more than double what the interested company itself invests and under what conditions is something that also remained unclear and, moreover, does not make sense on paper. And how they were going to get the shares sold to them and take control of the board of directors was also not clear at any point.
So, Cohen decided to do the most logical thing in these cases: go on television to explain himself. In a regrettable spectacle lasting almost thirty minutes where the CEO of GameStop seemed not to be in his right mind, he was constantly dodging all the questions from the host and his collaborators, not clarifying any of the doubts. Leaving any kind of plausibility about the possibility of the purchase up in the air.
eBay says no
All of this culminated with eBay issuing a statement on April 12. In it, they stated that “we have considered your proposal to be neither credible nor attractive.” Not stopping there and wanting to confirm their thoughts on the matter, they emphasized that “the board, with the help of independent advisors, has studied your proposal and has determined to reject it”. Cutting off any possibility of this purchase taking place.
But to be realistic, this purchase has never been able to take place. There was no material evidence that they had the means to make it, no matter how much hypothetical interest existed. So, why did they do this? It’s hard to know. But it doesn’t seem like they are going to stop here.
Because in fact, the odyssey is not over yet. Cohen has expressed his desire, after eBay’s outright refusal, that “the eBay shareholders themselves deserve the opportunity to evaluate them.” Stating that it is irresponsible to dismiss a proposal of 125 dollars per share, “I don’t want to make hasty decisions because we are dealing with people who make a lot of money and are not owners of the business, but we will do whatever it takes to present this proposal to the true owners of the company”. Therefore, it seems he still has an ace up his sleeve. Or something to gain by continuing with this.
What is the reason for all this? No one is clear about it. Some people want to see in this movement an attempt by GameStop to increase the value of its shares, but, in reality, its shares fell in the market after the announcement of the purchase of eBay. Others have wanted to see an attempt to become relevant at a time when it is becoming an increasingly irrelevant company. But the only thing certain is that GameStop is not going to buy eBay. Not for now. It also doesn’t seem like they will stop trying even though they lack the credibility or the means for this small fish to eat this big whale.
