eBay has rejected a $56 billion takeover approach from GameStop, citing doubts over the financing of a deal that would see a company roughly one-quarter the size of its target attempt an audacious acquisition.
“We have concluded that your proposal is neither credible nor attractive,” eBay told Cohen.
The rebuff raises the prospect of a hostile bid, with GameStop CEO Ryan Cohen having said last week that he is prepared to take the offer directly to eBay shareholders if the board did not engage.
eBay’s stock is trading around $107 per share in premarket trading, down 1.1% and below the proposed offer price of $125 per share, reflecting skepticism that the deal could be completed.
The proposed transaction, structured as half cash and half stock, has drawn criticism from analysts and investors who question whether the videogame retailer, valued at roughly $12 billion, can credibly finance an acquisition nearly four times its market capitalization.
Cohen has pointed to approximately $20 billion in potential debt financing from TD Securities, as well as GameStop’s ability to issue new shares, to fund the purchase.
The bid has also unsettled some of GameStop’s own shareholders. Michael Burry, the investor made famous by the film “The Big Short,” offloaded his entire stake in the company following the announcement.
Burry called the deal strategy “pedestrian” and flagged concerns over the resulting debt burden and shareholder dilution.
Cohen’s stated rationale centers on applying his cost-cutting approach to eBay while leveraging GameStop’s roughly 1,600 U.S. stores to build a physical retail network capable of competing more effectively with Amazon.
