GameStop’s (GME) shares dropped roughly 5% during Tuesday’s pre-market session after e-commerce platform eBay (EBAY) rejected the unsolicited $56 billion acquisition offer from the U.S. video game retailer. eBay, whose shares also fell over 1% following the news, said the proposal was “neither credible nor attractive.”
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eBay Rejects GameStop Acquisition Offer
The rejection comes over a week after GameStop CEO Ryan Cohen, who already has about a 5% stake in eBay, made the non-binding offer that values the e-commerce company at $125 per share. Cohen believes ebay — which currently has a market capitalization of roughly $48 billion — would be worth billion-dollars more in the future.
The update also comes days after Cohen revealed that the California-based company had abruptly shut down his eBay account. The account suspension follows the GameStop chief’s fundraising stunt on eBay, where he listed about 250 of his personal items, including a pair of socks, claiming it was to help finance the takeover.
‘eBay Is a Strong and Resilient Business’
GameStop had said it had about $9 billion in cash and $20 billion in borrowing from TD Bank to finance the deal. However, in announcing the rejection, eBay said several other points also factored into its decision:
- That eBay was better off as a standalone company
- The lack of clarity into how GameStop would finance the takeover
- The impact of GameStop’s offer on eBay’s long-term growth and profitability
- The risks of running a complex, combined entity, including those relating to opportunity for leverage, operational flow, and leadership
- How the above factors might affect eBay’s valuation
- Concern about GameStop’s governance and executive incentives
eBay said its board remains confident in the ability for the company to sustain its growth and deliver long-term value to its shareholders. “eBay is a strong, resilient business that has delivered meaningful results over the past several years,” the company explained.
“We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders.”
Is eBay a Good Stock to Buy?
On Wall Street, analysts consider eBay’s shares a Moderate Buy. This is based on 10 Buys and 14 Holds assigned over the past three months.
However, the average EBAY price target of $108.87 implies less than 1% upside in the months ahead.
