GameStop Shares Tumble 10% After CEO Avoids Questions on $55 Billion eBay Deal
GameStop shares dropped more than 10% on Tuesday after the company’s CEO, Ryan Cohen, refused to answer direct questions about how the video game retailer would fund its massive $55.5 billion bid for eBay. The sharp decline erased billions in market value and left investors questioning the feasibility of the proposed acquisition.
The deal, first reported last week, would combine GameStop with the online marketplace giant in a half-cash, half-stock transaction. Under the terms, GameStop would pay roughly $27.75 billion in cash and issue new shares worth the same amount to eBay shareholders. However, analysts quickly pointed out a significant funding gap that Cohen has not explained.
Funding Questions Remain Unanswered
GameStop currently holds about $4.6 billion in cash and short-term investments. Even if the company borrowed heavily, it would still fall far short of the cash portion needed for the deal. Cohen hinted at using debt financing and some of GameStop’s existing cash reserves, but he did not provide specific numbers or a clear plan during the investor call.
“The math simply does not add up,” said one analyst who covers specialty retail. “GameStop would need to raise tens of billions of dollars through debt or equity, and that would severely dilute existing shareholders or load the company with unsustainable debt.”
For context, GameStop’s entire market capitalization is roughly $11 billion. The proposed bid for eBay is five times that amount. To put it in perspective, imagine a small car dealership trying to buy a major airline. The size difference makes the deal extremely hard to justify without a clear funding source.
eBay Has Not Engaged in Talks
Adding to the uncertainty, eBay has publicly stated that it has not engaged with GameStop regarding the bid. The company’s board has not responded to the offer, and industry insiders say eBay is unlikely to entertain the proposal seriously. eBay generates over $10 billion in annual revenue and has a market cap of around $25 billion, making it a much larger and more profitable business than GameStop.
If eBay continues to ignore the bid, Cohen may resort to a proxy fight. This means he would try to convince eBay shareholders to vote out current board members and replace them with his own nominees. Proxy fights are expensive, time-consuming, and rarely succeed without strong shareholder support. Cohen has a history of aggressive tactics, having previously pushed for changes at companies like Bed Bath & Beyond and Chewy, but a hostile takeover of this scale would be unprecedented for him.
What This Means for Investors
For GameStop shareholders, the news is troubling. The stock has already fallen sharply from its meme-stock highs in 2021, and this latest drop adds to the pain. Many retail investors bought GameStop shares hoping for a turnaround under Cohen’s leadership. Instead, they are now facing the risk of a highly leveraged deal that could dilute their holdings or saddle the company with massive debt.
For eBay investors, the situation is less concerning. eBay remains a profitable business with strong cash flow. If the deal falls through, eBay shares may still benefit from the attention, as other potential buyers could emerge. However, the uncertainty around a possible proxy fight could create short-term volatility.
In simple terms, GameStop is trying to buy a much larger and healthier company without a clear way to pay for it. Until Cohen provides a credible funding plan, investors should expect more volatility and potential downside. The next few weeks will be critical as shareholders and analysts demand answers that Cohen has so far avoided giving.
