eBay Stock Jumps Premarket After GameStop’s $56 Billion Takeover Bid

TLDR

• GameStop made an unsolicited, non-binding offer to buy eBay for $125 per share in a 50/50 cash-and-stock deal, valuing eBay at roughly $56 billion.
• The offer represents a 20% premium to eBay’s Friday closing price of $104.07, and eBay stock jumped over 6% in premarket trading Monday.
• GameStop CEO Ryan Cohen said he wants to turn eBay into a serious Amazon competitor and is prepared to run a proxy fight if needed.
• GameStop has built a roughly 5% stake in eBay and secured a $20 billion debt commitment from TD Securities to help fund the deal.
• eBay’s board confirmed it received the offer and is reviewing it, advising shareholders to take no action for now.

GameStop CEO Ryan Cohen dropped a bombshell Sunday evening, announcing an unsolicited, non-binding offer to acquire eBay for $125 per share — a deal that would value the e-commerce platform at roughly $56 billion.

eBay Inc., EBAY

The offer is structured as half cash and half GameStop stock, and comes at a 20% premium to eBay’s closing price of $104.07 on Friday.

eBay stock surged more than 6% in premarket trading on Monday. In after-hours trading Sunday, it had jumped as high as 13.4% to around $118 — still below the offer price, a sign that investors are not fully convinced the deal will go through.

GameStop’s current market cap sits at just under $12 billion, making this a rare case of a much smaller company attempting to swallow a larger one.

Cohen told CNBC Monday morning that he had not spoken with eBay’s management before making the offer public.

eBay confirmed receiving the offer Monday and said its board of directors would review it. The company advised shareholders to take no action at this time.

How GameStop Plans to Fund It

The financing is one of the biggest question marks hanging over the deal. GameStop has secured a $20 billion debt commitment from TD Securities, and Cohen said the company would also draw on its roughly $9.4 billion cash pile.

The remaining gap could be covered through the issuance of new GameStop stock — something Cohen acknowledged but was vague about in his CNBC interview, directing viewers to GameStop’s website for full details.

GameStop has built approximately a 5% stake in eBay, made up primarily of derivatives and some common stock. Cohen argued that gives eBay’s board a fiduciary duty to seriously consider the proposal.

GameStop also said it plans to deliver $2 billion in annualized cost savings within 12 months of closing, accusing eBay of overspending on sales and marketing. Cohen would serve as CEO of the combined entity.

Wall Street’s Reaction

Cohen also warned he is prepared to take the fight directly to eBay’s shareholders via a proxy battle if the board doesn’t engage.

GameStop stock was down about 1% on Monday, trading at $26.30 per share.

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