Ryan Cohen weighs pulling $56 billion eBay bid for store partnership
NEW YORK, Aug. 14. A $56 billion unsolicited bid for eBay Inc. (NASDAQ: EBAY) may be withdrawn before it advances, Bloomberg reported August 10, as GameStop Corp. (NYSE: GME) chief executive Ryan Cohen weighs replacing the offer with a commercial partnership. GameStop shares gained 1.6% in early trading on the report; eBay fell 2.2%.
Key takeaways
- A $56 billion unsolicited bid by GameStop CEO Ryan Cohen for eBay may be withdrawn as he weighs replacing it with a commercial partnership, Bloomberg reported August 10.
- The May bid valued eBay at $125 per share in a half-cash, half-GameStop-stock structure, but eBay's board rejected it within days as "neither credible nor attractive."
- Cohen kept buying eBay shares after the rejection, raising GameStop's stake to 9.75% and making it eBay's second-largest shareholder behind Vanguard's index funds.
- The proposed partnership would let eBay expand in trading cards and collectibles using GameStop's roughly 1,600 U.S. stores, in exchange for GameStop gaining one or two eBay board seats.
- On the August 10 report GameStop shares rose 1.6% while eBay fell 2.2%, and since May GameStop has dropped 28% while eBay has risen 7.6%.
NEW YORK, Aug. 14. A $56 billion unsolicited bid for eBay Inc. (NASDAQ: EBAY) may be withdrawn before it advances, Bloomberg reported August 10, as GameStop Corp. (NYSE: GME) chief executive Ryan Cohen weighs replacing the offer with a commercial partnership. GameStop shares gained 1.6% in early trading on the report; eBay fell 2.2%.
The May bid priced eBay at $125 per share, half cash and half GameStop stock. eBay's board rejected it within days, calling the approach "neither credible nor attractive." The board cited doubts about how GameStop, which held $8.4 billion in cash at a time its own market value had slipped to $8.6 billion, would finance an acquisition of a company roughly six times its size.
Cohen did not step back after the rejection. He kept buying eBay shares through the summer, pushing GameStop's stake to 9.75% and making the video-game retailer eBay's second-largest shareholder, trailing only Vanguard's index funds. He told Bloomberg TV he intended to close a deal "one way or another."
The revised approach
What Cohen is now said to be considering is considerably smaller in scale. The partnership model would let eBay expand in trading cards and collectibles by using GameStop's roughly 1,600 United States retail locations. In exchange, GameStop would seek one or two seats on eBay's board, according to the Bloomberg report. No decision has been finalized.
What the tape has been saying
GameStop's stock has dropped 28% since the original bid was disclosed in May. eBay has risen 7.6% over the same period. The August 10 moves followed that pattern. GameStop edged higher; eBay fell slightly. Investors appeared to have priced out the likelihood of the full deal closing well before Cohen indicated any shift.
Institutional positioning, as reported by Insider Monkey's 13F database, showed the gap widening ahead of the August 10 report. Hedge fund holders of GameStop declined from 31 in the fourth quarter to 29 in the first quarter, with short interest in the stock at 13.55% of the float. eBay's fund holder count moved in the opposite direction, from 59 in the fourth quarter to 61 in the first quarter, with short interest at 3.51% of the float.