Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Video game retailer GameStop is making a $55.5bn unsolicited offer for resale web giant eBay, the company announced on Sunday evening.
GameStop has built a 5 per cent stake in eBay and is offering $125 a share, half in cash and half in stock. That represents a 46 per cent premium to eBay’s closing price on February 4, the day GameStop began accumulating its position.
In a letter to the chair of eBay’s board, GameStop’s chief executive Ryan Cohen said he believed a merger could cut costs and boost earnings. Cohen also said that GameStop’s roughly 1,600 US stores would give “eBay a national network for authentication, intake, fulfilment and live commerce”.
Cohen said he would serve as the chief executive of the combined company.
GameStop, the world’s largest video game retailer, had declined in performance and popularity in recent decades as shopping shifted online. But the company’s value skyrocketed in 2021 during the initial meme-stock craze, when retail traders bought shares en masse, squeezing the substantial short sellers betting against GameStop.
The company’s market capitalisation has fallen from its peak in 2021, but has remained substantially higher than it was pre-meme craze. As of Friday, GameStop was worth roughly $11.9bn, while eBay was valued at $46bn.
Shares in eBay soared more than 10 per cent to $114.74 in pre-market trading on Monday, while GameStop was up about 4 per cent.
Cohen said he had secured a commitment letter from TD Bank for $20bn in debt financing. He has also said that if eBay rejects the offer, he will enter into a proxy fight and appeal directly to eBay’s shareholders.
GameStop declined to comment, while TD Bank and eBay did not immediately respond to requests for comment.
A former dotcom darling, eBay has long struggled to respond to changing consumer habits and intense competition from ecommerce giant Amazon alongside newer platforms such as Depop and Vinted.
Under the leadership of former Walmart executive Jamie Iannone, the “recommerce” group has focused on delivering growth in several specific areas, including collectibles.
On Wednesday, eBay said gross merchandise volume — the total value of all paid transactions on its platform — rose 18 per cent in the first quarter of the year to $22.2bn. Iannone attributed the strength to the group’s positioning as a “marketplace of choice for enthusiasts”.
Profits at the group climbed to $512mn in the quarter, up from $499mn the previous year. GameStop is expected to post results in early June.
Earlier this year, eBay said it planned to acquire Depop, a second-hand fashion platform popular with Gen Z and young millennials, from Etsy for about $1.2bn. The company plans to cross-list Depop sellers’ items on its platform through the acquisition aimed at increasing market share.