Game Stop Bids for eBay

Return of the Meme Lord

This post has been edited since its first publication

Back in August of 2022, I wrote about Ryan Cohen (aka “The Meme Lord” or “Papa Cohen”), the founder of Pet Smart and currently the Chairman and CEO of Game Stop, the video games retailer of meme stock infamy. In that post, I discussed Cohen’s pump and dump scheme at Bed Bath & Beyond, which left his gullible followers nursing big losses after Cohen quietly bailed out of his 10% stake in BBBY while his supporters were still piling in on the expectation that he might work miracles at the troubled housewares retailer. When the dust settled, Papa Cohen made himself an estimated $60-70 million of trading profit, but within a year Bed Bath and Beyond had filed for bankruptcy and was liquidated, leaving BBBY shareholders with nothing to show for their confidence in the company or in Papa Cohen.

I have no idea what sort of operational miracles Ryan Cohen may have worked at GameStop over the past few years, but he has certainly raised a lot of cash in the wake of the covid meme stock craze. Readers may recall that Cohen began acquiring his GME stake take back in August of 2020, when the shares were trading at a price of around $5 (split-adjusted) and the company had an implied equity market value of just $400 million or so. After disclosure of Cohen’s initial position, the GME share price tripled, to over $15 per share, as Cohen added to his stake, eventually acquiring ca 15% of the outstanding shares, subsequently diluted to 9% or so as result of the company’s large share issuances.

As Cohen and his followers piled into the stock, however, hedge funds were shorting it in a massive bet on the future collapse of the share price, triggering what came to be one of the most highly publicized short squeezes in US stock market history. This is a story well told in the aptly named 2023 film Dumb Money, which I recommend for those of you who may wish to revisit all the craziness.

At their peak price in January 2021, GameStop shares traded briefly at an intra-day high of $120 (split-adjusted), driven by frenetic retail buying and large short covering by the hedge funds. By the time the retail hype and short-covering had abated, however, the GME share price had fallen back closer to earth, trading at $20 by May of 2021 and $10 three years later (April 2024). During this period, the Company reported close to $1 billion of cumulative net losses, but was able nonetheless to raise $9 billion of cash from investors through the issuance of common shares and convertible securities at prices that were much reduced from the dumb money peak but still far in excess of any sensible price suggested by traditional valuation analysis.

Fast forward to March of 2026 when GameStop announced its 2025 results, reporting its first significant profit in almost a decade, with over $400 million of net income. Over half of the 2025 earnings, however, came not from operations (as in the glory days) but rather from interest income on the company’s $9 billion pile of cash. GME shares traded down to around $22 following the earnings release, for an implied equity market value of $10 billion and an enterprise value (equity market cap less net cash) of $5 billion, equating to a not unreasonable multiple of 20-25x earnings. Over the subsequent month, however, the GME share price increased by 20% and closed this past Friday at a price of $26.50, adding $2 billion to the value of the company.

All of which brings us to this past weekend, when GameStop unexpectedly proposed to acquire eBay for a headline price of around $56 billion, over ten times GameStop’s own enterprise value just one month ago. eBay confirmed receipt of the proposal, which it described as “unsolicited” and “non-binding”, stating further that it had “no discussions with or outreach from GameStop prior to receiving the proposal”. Which is apparently how things are done in the land of the Meme Lord.

So what are we to make of this latest bold move by Cohen? I’m not entirely sure, but I can’t imagine that the board of eBay will find the GameStop proposal compelling, at least not in its current form. Why is that?

Well, to begin with eBay is a much larger company than is GameStop. During 2025, eBay generated $11 billion of revenue and $2 billion of net income, essentially all of which came from operations. Contrast this to GameStop, which generated $3.6 billion of revenue and roughly $200 million of net operating income. As valued by the stock market, the business and operations of eBay are currently worth something like ten times as much as those of GameStop, once we strip out the excess cash. Of course, bigger does not always mean better, and the stock market is not always right, but it in practice it has nevertheless been quite difficult for corporate minnows successfully to swallow corporate whales. And when they do the result can sometimes be worse for the whale than for the minnow. (I am thinking here of AOL/Time Warner).

We should also note that both GameStop and eBay are in the midst of their own operational turnarounds, which may complicate matters further. The turnaround at eBay is just now beginning to bear fruit, but both the company and the stock market seem to believe it will ultimately be successful. eBay’s Q4 results were much better than those of the prior year, and the company’s stock price has increased 50% in the past year and 130% or so since January 2024, in large part on the expectation of a successful turnaround. GameStop seems quite proud of the results of its own nascent turnaround, but in its proposal to the eBay board it was highly critical of the recent performance at eBay, identifying several billion dollars of cost savings and operational efficiency gains that it believes could be extracted by combining the two companies under the leadership of GME CEO Cohen. (For more on this, see the GME Investor Relations release, link below and here.)

However the biggest issue the eBay board may have with GameStop’s proposal will likely be its structure. As reported by the WSJ, Cohen is proposing to buy eBay at a price per share of $125, a healthy 20% premium to eBay’s closing price on Friday ($104) and a 46% premium to eBay’s “unaffected” share price back in February, when GME began acquiring shares. (GameStop now owns 5% of eBay in the form of shares and share derivatives.) But even a cursory examination of the deal structure calls into question whether the GME proposal will really give the eBay shareholders much that they don’t currently have or need, other than perhaps Papa Cohen as CEO, which the eBay board may well view as at best a mixed blessing.

The total headline value of GameStop’s bid is $56 billion, with GameStop proposing to buy all of eBay’s shares for $28 billion in cash plus another $28 billion in newly issued GME shares. To fund the cash portion of the bid, Cohen has obtained a “highly confident” letter (not a lending “commitment”) from TD Bank for up to $20 billion of debt financing, which will be topped up with a large portion of GME’s own $9 billion of cash. The stock portion will consist of an unspecified number of newly issued GME shares, of uncertain value, which at Friday’s closing price would result in the former GME shareholders owning ca 20% of the combined company.

Put this all together and what do the eBay shareholders get out of the deal? Well, they receive $28 billion of cash, which is not nothing. But $20 billion of this cash will be funded by loans (and securities) based largely on the credit of eBay’s own assets and cash flows, leaving the combined company sitting on debt equivalent to over 7x EBIDA and with little or no excess cash on hand. The shareholders of eBay will also receive 80% (or more) of the combined company’s shares, which means of course that they will also get a comparable share of the much increased financial risk embedded in the new company, albeit with only half as much of their investment capital still at risk. If in their infinite wisdom the directors of eBay somehow came to believe that it made sense to lever up the company and distribute a large (though lesser) amount of cash to their shareholders, however, they could do this themselves via some form of leveraged recap, without any help from Papa Cohen.

I don’t know nearly enough about either eBay or GameStop to have a truly informed or insightful view of all the possible pros and cons of Cohen’s proposal. But it looks to me like the stock market doesn’t think much of it either, at least not initially. As I write mid-day on Tuesday, the eBay share price is essentially unchanged from Friday’s close, after giving back all of Monday’s initial 5% pop. And to make matters tougher for Cohen, GME shares are already down around 12% ($1.4 billion), from Friday’s close, which was perhaps to be expected but won’t help sell this deal to the board or shareholders of eBay.

Or for that matter to the shareholders of GameStop. In response to the eBay proposal, GameStop shareholder Michael Burry (from The Big Short fame) has reportedly sold his entire 5% GME position, apparently after reconsidering his previous investment thesis that Ryan Cohen could somehow become the next Warren Buffett and make GameStop the next Berkshire Hathaway. (I kid you not. He actually said this, apparently.) In an interview with CNBC, Dr. Burry explained the rationale for his GME exit in just five words: “Never confuse debt for creativity”.

“Never confuse debt for creativity.” Thank you Dr. Burry. These are words which should be imprinted on the foreheads of all young students and practitioners of finance, before they become self-appointed masters of the universe like so many in my generation did, sowing financial confusion, chaos and catastrophe in their wake and all too rarely coming to regret it, often bailing out before the you-know-what hit the proverbial fan.

Which in some ways sounds a bit like Papa Cohen.

Links

GameStop Makes $56 Billion Offer for eBay, WSJ, May 4, 2026

GameStop Proposes to Acquire eBay for $56 Billion, NY Times, May 4, 2026

GameStop Investor Release, May 3, 2026

eBay Confirms Receipt of Unsolicited Proposal from GameStop, eBay Investor Relations, May 4, 2026

GameStop, eBay and the Bet on Debt, WSJ Opinion, May 5, 2026