The math doesn’t work. That’s the first thing to understand about GameStop’s $56 billion bid for eBay. The second thing is that the math not working has never stopped Ryan Cohen before.

GameStop — the video game retailer with a market capitalization of roughly $12 billion — announced on Sunday that it is offering to acquire eBay for $125 per share in cash and stock, a roughly 20% premium over eBay’s most recent closing price. The deal values eBay at approximately $56 billion, or about 4.7 times GameStop’s entire worth.

Cohen, GameStop’s chairman and CEO, told the Wall Street Journal that the company has accumulated a roughly 5% stake in eBay and secured a commitment letter from TD Bank for about $20 billion in debt financing. GameStop has roughly $9 billion in cash on hand, according to Cord Cutters News. That leaves roughly $27 billion unaccounted for — a gap Cohen reportedly plans to bridge by courting sovereign wealth funds and other outside investors.

eBay’s stock surged more than 13% in after-hours trading on Friday when the Journal first reported a bid was imminent. GameStop shares also rose. The market is treating this as something more than a stunt, though how much more remains an open question.

The Strategic Logic, Such as It Is

There is a case to be made, or at least attempted. Both companies have spent years struggling to adapt to shifting consumer habits. GameStop has shuttered stores, laid off workers, and pivoted toward collectible toys and trading cards as digital downloads erode its core business. eBay has been pushing collectibles and used goods — categories with natural overlap among GameStop’s customer base.

Cohen’s vision, as reported by the Journal, involves turning the combined entity into a retail juggernaut. GameStop’s physical locations could serve as authentication hubs, pickup points, and return centers for eBay sellers, bridging online and offline commerce. An expanded focus on live commerce and collectibles could, in theory, accelerate growth for both brands.

Whether this constitutes a coherent strategy or a collection of buzzwords arranged into a press release is a judgment readers can make for themselves.

Cohen’s Track Record of Grand Gestures

This is not Cohen’s first audacious move. The billionaire founder of Chewy joined GameStop’s board in January 2021, when the company’s market capitalization was roughly $1.3 billion. He has since overseen a dramatic downsizing — layoffs, store closures, and selling off the iconic gaming magazine Game Informer.

By GameStop’s own telling, the results speak for themselves. According to the company’s investor relations materials, selling, general, and administrative expenses have fallen 44% under Cohen’s tenure, and the company swung from a $381 million net loss to $421 million in net income. Market capitalization has grown roughly 615%. But the turnaround has been driven primarily by cost-cutting and balance-sheet management rather than top-line revenue growth — a strategy with natural limits, which may explain why Cohen is now looking outside the company for a transformation.

He has a powerful personal incentive to aim high. Earlier this year, GameStop announced a compensation package that could pay Cohen as much as $35 billion if the company’s market capitalization reaches $100 billion. The award includes no salary and no cash bonuses — only stock options that vest in nine tranches, each tied to escalating market-cap and earnings milestones starting at $20 billion.

Buying eBay would push GameStop partway toward that goal in a single transaction. Whether that constitutes strategic vision or compensation engineering is a question eBay’s board and shareholders will have to weigh.

What Happens Next

Cohen told the Journal he is prepared for a proxy fight if eBay’s board rejects the offer. The timing complicates that plan: the window for nominating directors ahead of eBay’s next annual meeting has already closed, according to Cord Cutters News. eBay has not publicly responded.

The central question is not whether this deal makes strategic sense — reasonable people can disagree — but whether the financing actually exists. A $20 billion commitment letter from TD Bank is a serious document, not a casual expression of interest. But sovereign wealth funds do not typically materialize on command. And loading $20 billion in debt onto a company with GameStop’s revenue profile would test even the most generous definitions of leveraged finance.

Cohen acknowledged the risks himself back in January, when he first teased plans for a major acquisition. “It’s ultimately either going to be genius or totally, totally foolish,” he said, according to GameSpot.

eBay’s surging stock price suggests the market sees a non-trivial chance that something real comes of this. GameStop’s rising stock suggests its shareholders are either equally convinced or simply along for the ride. In the meme-stock era, those two explanations are not mutually exclusive.

Sources