Yes, GameStop really has made a $56 billion offer to buy eBay. The game store is barely a quarter the size of the online auction site, but CEO Ryan Cohen believes that the offer would be transformational for eBay, which he hopes to turn into an online retailer that could rival Amazon.
Reports about the deal began to emerge this past Friday, and Cohen made it official with an open letter to eBay chairman Paul Pressler on Sunday. The proposal? GameStop gets "all common stock of eBay Inc. at $125.00 per share," a $56 billion buyout which will "comprise 50% cash and 50% GameStop common stock." Cohen would serve as CEO and would "be compensated solely based on the performance of the combined company."
Ahead of the deal, eBay was valued around $46 billion, so GameStop's offer goes substantially beyond market value. GameStop itself is only valued around $12 billion, but Cohen says he has a commitment from TD Securities for "up to $20 billion." Where the rest of the money will come from is unclear, but GameStop does have $9 billion in cash on hand, and The Wall Street Journal's sources suggest that external backing – from, say, a sovereign-wealth fund in the Middle East – is "possible."
"eBay should be worth – and will be worth – a lot more money," Cohen tells WSJ. "I'm thinking about turning eBay into something worth hundreds of billions of dollars." If that doesn't sound confident enough, he adds, "There is nobody who is more qualified, based on my experience, to run the eBay business."
Cohen suggests that, if the two companies combine, GameStop's physical stores could collect items from eBay sellers. He also suggested that eBay could expand on live commerce, a QVC-meets-TikTok model where sellers hawk their wares via livestream, and something eBay is already investing in.
"It could be a legit competitor to Amazon," Cohen claims, also saying that he wants to be "personally involved" in transforming eBay.
I buy a lot of old video games and other odds and ends on eBay, and I think the experience is basically a good one these days – notwithstanding a bad experience with an individual seller here and there, of course. Meanwhile, I haven't had a good transaction with GameStop since it was still called Babbage's. Suffice to say that I'm skeptical anything good for consumers would come of the deal.
Cohen, meanwhile, has substantial financial incentives here. According to WSJ, his compensation package at GameStop, which was adjusted earlier this year, includes incentives of $35 billion in stock if he's able to meet certain performance criteria – like boosting the company's market value above $100 billion. Buying out a major online retailer would be a massive shortcut along that journey.
