GameStop (GME) Raises eBay Stake as Ryan Cohen Turns Up Takeover Pressure

Video game retailer GameStop (GME) has raised its stake in online marketplace eBay (EBAY) to about 6.55%, according to a Tuesday filing, just days after eBay rejected GameStop’s $56 billion takeover proposal. GameStop previously owned roughly 5% of the company, so the larger position shows that CEO Ryan Cohen is not walking away quietly. Some analysts believe that Cohen could eventually push for a special shareholder meeting or seek board representation that is more open to his plan. Cohen has also been publicly pressuring eBay’s board.

In an interview with Piers Morgan last week, he said that eBay’s directors have a responsibility to consider his offer if it is in shareholders’ best interests, and added that GameStop would “do whatever we need to do” if the board refuses to engage. Cohen has argued that his offer represented a large premium and that eBay could become much more successful under an owner-led strategy. He has also criticized eBay’s website as outdated by saying that it “still looks like it did in 1995,” while claiming he could cut about $2 billion in costs and turn the platform into a stronger live-shopping business.

However, not everyone is convinced the deal makes sense. eBay rejected the bid because of financing concerns, while pointing to its own turnaround plan and improving growth. Michael Burry also questioned Cohen’s plan and even sold all of his GameStop stock after Cohen struggled to explain the deal’s financial details on TV. Burry warned investors not to “confuse debt for creativity,” which highlights the skepticism of financing and executing such a massive takeover.

Is EBAY Stock a Good Buy?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on EBAY stock based on nine Buys, 13 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average EBAY price target of $109.62 per share implies 6.4% downside risk.