GameStop’s (GME) shares dropped about 2% on Friday morning after a regulatory filing showed that the U.S. video game retailer’s board has asked shareholders to increase the company’s authorized shares.
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GameStop Board Seeks to ‘Act Decisively’
The disclosure comes days after another filing showed that GameStop had raised its stake in eBay (EBAY) despite the e-commerce platform dismissing the video game company’s $56 billion acquisition offer as “neither credible nor attractive.” In the new document, the board requested permission to increase the retailer’s authorized shares of common stock to 2.5 billion and all classes of shares to 2.505 billion.
The board contended that “a reserve of authorized shares ensures GameStop can act decisively when the right opportunity arises.” It added that it does not plan to issue new shares lightly.
Furthermore, the new filing also shows that the board proposed an options award entirely based on performance for CEO Ryan Cohen. The required condition is leading GameStop to sustainably more than double its market cap to $20 billion while the retailer generates billions in actual, cumulative earnings.
The board said Ryan has not been drawing a salary, taking a cash bonus, or receiving a time-vested stock award from the company.
Meanwhile, the board’s request comes as analysts have previously noted that GameStop’s bid to acquire eBay may be far from over despite rejection of the unsolicited takeover offer. Analysts believe that GameStop could raise its offer, take its bid directly to eBay shareholders, or boost its financial base if concerns about its financing package emerge.
GameStop had secured about $20 billion in financing from TD Bank, adding that to its own $9 billion in cash to make the $125-per-share offer. However, eBay listed a lack of clarity on how GameStop would finance the takeover as one of the reasons for slamming the door on the bid.
Is eBay a Good Stock to Buy Now?
On Wall Street, analysts still consider eBay’s shares a Moderate Buy. This is based on nine Buys and 13 Holds assigned over the past three months.
Moreover, the average EBAY price target of $109.62 implies about 5% downside risk in the months ahead
