eBay Inc. (EBAY) jumped in pre-market after GameStop (GME) made an offer to buy the online marketplace for $125 per share. The bid values eBay at about $55.5 billion and is made up of a mix of cash and GameStop stock. Meanwhile, GME shares went the opposite direction and fell over 4% (at the time of writing).
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The move gave eBay stock a clear lift, which makes sense. When a firm receives a buyout offer above its last close price, the target stock often moves up toward the deal price. In this case, the offer was about 20% above eBay’s prior close of $104.07.
Still, eBay did not trade as high as $125. That gap shows that the market is not sure the deal will close. Investors seem to like the offer, but they also see real risk. eBay’s board still needs to review the bid, and the deal would also need votes and checks from both sides.
GameStop CEO Ryan Cohen told CNBC that talks with eBay have not yet begun. “We are just starting,” Cohen said. eBay, for its part, said its board would review the offer.
Investors See Big Risk for GameStop
On the other side, GameStop stock came under some heat. That is common when a buyer tries to buy a much larger firm. GameStop’s market value is near $12 billion, while eBay’s is about $46 billion. So, this would be a large deal for GameStop to take on.
The deal also raises cash and stock risk. Half of the offer would be paid in GameStop stock, which could dilute current holders. The cash side is also a key point. GameStop has a $20 billion loan letter from TD Bank, but the total deal size is much larger.
Cohen framed the deal as a way to make eBay leaner. He said eBay is “under-earning and can make a lot more money.” He also pointed to eBay’s high sales and marketing spend, saying, “There’s a lot of fat to cut.”
That may be the core of the pitch. GameStop thinks it can cut costs, use its store base, and lift eBay’s profit. However, the market is still waiting for proof that GameStop can fund and close the deal.
For now, the stock moves tell a simple story. eBay is trading like a target with a real offer on the table. GameStop is trading like a buyer facing a very large and risky bet.
We used TipRanks’ Comparison Tool to align and compare the two stocks, gaining an in-depth view of how they stack up against each other.
