Online auction platform eBay turned down a massive $56 billion acquisition proposal from GameStop on Tuesday, expressing skepticism about the video game retailer’s ability to finance such an enormous transaction while highlighting its own successful business transformation initiatives.
The dismissal may pave the way for an aggressive takeover attempt, as GameStop’s chief executive Ryan Cohen indicated last week his willingness to bypass eBay’s board and present the proposal straight to company shareholders.
Market experts and investors have questioned the feasibility of the mixed cash-and-stock proposal from the $12 billion gaming company seeking to acquire a business worth nearly four times its own market capitalization. eBay’s share price has remained $20 under the proposed $125 per share offer price.
The takeover attempt has also frustrated certain GameStop stakeholders. Michael Burry, the investor made famous by “The Big Short,” divested his entire position in GameStop following the bid announcement.
Describing the acquisition strategy as “pedestrian,” Burry, who previously compared GameStop CEO Ryan Cohen to investment legend Warren Buffett, expressed concerns about increased debt obligations and the dilution of shareholder value.
Cohen aims to implement his successful expense-reduction strategies from GameStop to enhance eBay’s profit margins, while leveraging GameStop’s approximately 1,600 retail locations across the United States to create a brick-and-mortar presence that could help eBay compete more effectively against Amazon.
The GameStop leader has highlighted potential debt funding of $20 billion through TD Securities and GameStop’s capacity to issue additional shares to support the transaction financing.
