GameStop may be preparing to turn its failed $55.5 billion attempt to buy eBay into a significantly cheaper push for influence over the company, after already spending roughly $4.36 billion to accumulate nearly 10% of the online marketplace.
CEO Ryan Cohen is considering withdrawing GameStop’s unsolicited takeover proposal and instead pursuing a commercial partnership or joint venture with eBay, Bloomberg News reported through Reuters, citing people familiar with the matter.
Under one possibility being considered, eBay could make use of GameStop’s roughly 1,600 US stores, particularly as the companies push deeper into trading cards and collectibles. GameStop would seek seats on eBay’s board as part of a partnership, according to the report.
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A withdrawal would not leave GameStop walking away from eBay empty-handed. A July Schedule 13D filing shows GameStop beneficially owns 43.39 million eBay shares, equal to approximately 9.8% of the company based on eBay’s previously disclosed share count.
GameStop purchased 3.52 million shares for $381.3 million between June 8 and June 15. It subsequently took physical delivery of another 39.05 million shares underlying put and call positions, paying approximately $3.97 billion for those shares after previously paying $9.8 million in net option premiums.
That puts GameStop’s disclosed expenditure associated with the stake at roughly $4.36 billion.
The position gives Cohen a different route to eBay than the original acquisition proposal. Rather than financing the purchase of the entire company, GameStop could remain one of eBay’s largest shareholders while seeking representation inside the boardroom.
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GameStop originally proposed buying eBay on May 3 for $125 per share, valuing the company at approximately $55.5 billion on an undiluted basis.
According to GameStop’s original announcement filed with the SEC, shareholders would have received consideration split equally between cash and GameStop stock. GameStop said it had approximately $9.4 billion in cash and liquid investments at January 31 and a highly confident letter from TD Securities covering as much as $20 billion of acquisition financing.
The proposal also contemplated Cohen becoming CEO of the combined company and targeted $2 billion of annual cost reductions within 12 months.
eBay rejected the proposal on May 12. In its formal response, eBay’s board called the offer “neither credible nor attractive,” specifically identifying financing uncertainty, leverage, operational risks, the leadership structure of a combined company, valuation, and GameStop’s governance and executive incentives among its concerns.
Cohen nevertheless continued accumulating eBay stock. GameStop increased its position from an initial 5% economic interest in May to 9.8% by July.
The reported pivot would preserve one of Cohen’s central arguments for combining the companies without requiring GameStop to acquire eBay outright. The question may therefore be shifting from whether it can finance ownership of all of eBay to how much influence a 9.8% shareholder can obtain without buying the remaining 90.2%.
