GameStop (GME) made quite the stir over the weekend when – seemingly out of nowhere – it announced its intentions to acquire eBay (EBAY).
The video game chain made an unsolicited bid to buy the e-tailer for $55.5 billion. This comes to about $125 per share for a stock that was trading at $105.36 last Friday.
It’s also 46% higher than eBay’s closing price on February 4, when GameStop began building up its current 5% stake in the company.
CEO Ryan Cohen says he can add intense value to the acquisition target, which he believes has been underperforming. As such, GameStop released a statement saying that:
eBay spent $2.4 billion on sales & marketing in fiscal 2025 while only adding 1 million net active buyers (… a net increase of less than 0.75%). GameStop will deliver $2 billion of annualized cost reductions within 12 months of closing.
Cohen believes this could turn eBay into a legitimate Amazon (AMZN) competitor.
I’ll give him this much: He’s certainly generated headlines, starting with The Wall Street Journal’s breaking news story on the subject. Everyone’s been talking about it, weighing in with their own opinions.
So I figured I would too… even if I can sum up my thoughts in three simple words.
I’m. Not. Impressed.
Fortunately, my regular readers aren’t the type to fall for this kind of stunt. They’re interested in safe, secure investment opportunities, not meme-stock antics.
All the same, I understand this could be a teachable moment for any newcomers, especially those with limited market experience. One of my main goals here at Wide Moat Research is to help investors avoid losing money, after all.
And this GameStop move? It looks like a classic example of how to lose money.
Credit Where Cohen Is Due
GameStop is a not-completely-stable company trying to take over a successful company.
I don’t mean to sound rude here, but let’s face the facts.
eBay might not be doing as well as it could right now. Maybe it is making some marketing mistakes. And perhaps it could cut down on spending elsewhere, too…
But it still reported total revenue of $11.1 billion last year – up 7.95% over 2024 – whereas GameStop’s revenue declined 5.05% to $3.630 billion.
Now, in Cohen’s defense, that’s not the only financial figure that matters. And as GameStop’s official acquisition declaration declared:
Mr. Cohen has led GameStop since January 2021. Over that period, GameStop moved from a $381 million net loss in fiscal 2021 to $418 million of net income in fiscal 2025, reduced SG&A [selling, general, and administrative expenses] by ~$800 million (47%), retired its legacy debt, and raised $4.2 billion of long-term debt at 0% coupon. He owns ~9% of GameStop and receives no salary, no cash bonuses, and no golden parachute.
He did all that by replacing executive team members… embracing an omni-channel focus, something his predecessor wasn’t so fond of… and promoting collectibles and trading cards, a venture that did very well last year.
Cohen also closed hundreds of underperforming stores – another move his predecessor refused to consider despite mounting financial failures. He cut SG&A expenses by 44%. And he strategically sold shares during the “meme stock” craze we saw a few years ago to build up the company’s cash reserves.
GameStop now has around $9.4 billion on its books for a rainy day… or, apparently, a very expensive acquisition attempt.
Considering what an abject mess this company was before he took over, that’s impressive. There’s no two ways about it, and let’s give credit where credit is due.
Even so, past successes don’t guarantee future profits – a mantra we’re seeing play out in real time right now.
The worst interview ever?
Honestly, I’m wondering whether Cohen’s past successes have gone to his head.
How else can you explain a company that only returned to profitability in 2025 wanting to take on billions of dollars in debt the very next year?
Now, according to GameStop’s official announcement, its $125 per-share offer comprises 50% cash and 50% common stock. Say what you want about the validity of the stock portion of that offer, it does still reduce the actual cash consideration.
With that said, GameStop would use all of its $9.4 billion reserves, plus third-party acquisition financing from TD Securities per “a highly confident letter from TD Securities for up to $20 billion” to finance the rest.
The resulting math doesn’t add up – a point Cohen himself couldn’t or wouldn’t refute during a Monday interview on CNBC’s Squawk Box. We learned that loud and clear when anchor Andrew Ross Sorkin brought up financing.
… the market cap of GameStop is, call it $11 billion. You have $9 billion on your balance sheet. Arguably, if you’re providing effectively all of your stock and then the cash, that gets you to $20. You have this letter from TD. That’s another $20. We’re now at $40, but we’re still off by… $16. And the $20, as far as I understand, while it’s considered a “highly confident letter” – meaning TD [is] saying they’re highly confident that they would provide the financing – it’s not locked-in financing.
To which Cohen replied, “Yeah, we’ll see what happens.”
That was it.
This response – if it can be called that – understandably stumped Sorkin for several seconds before he was able to recover with, “I hear you. I understand that. I’m just trying to understand where the rest of the money would come from.”
To which Cohen replied, “It’s half-cash, half-stock.”
Again, that was it.
And when pressed further, his response was, “I don’t understand your question. We’re offering half cash, half stock, and we have the ability to issue stock in order to get the deal done. But the full details of the offer are on our website.”
I’m not kidding. Or exaggerating. Or truncating his response.
That was really all Cohen was willing to say on the subject.
Too Many Reasons to Dislike GameStop’s eBay Bid
You can watch the full interview right here.
Or you can trust me that it won’t make you feel any better about GameStop buying eBay. Cohen was utterly unengaged with most of the conversation, barely looking into the camera and otherwise appearing bored.
That’s not a flattering look for someone running one company, much less trying to merge two.
It must be stated that eBay didn’t immediately reject the offer. Its board should meet this week to discuss the details.
So who knows: Cohen might have the last laugh in all of this. He certainly seemed to think so in the interview, pointing out how many times his media critics declared his company dead in recent years.
But I consider the possibility of him coming out ahead slim enough to count out altogether.
Long-time GameStop bull Michael Burry agrees. He just exited his entire position based on the eBay bid alone. “Never confuse debt for creativity,” he said on Substack, calculating that Cohen’s proposition would push the company’s debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) to about the 7.7x mark.
That’s not a profitable ratio, to say the least – just one more reason to dislike this “deal.”
At the end of the day, what matters to me isn’t whether GameStop can pull off a headline‑grabbing acquisition. It’s whether there’s a durable moat here for long‑term shareholders.
Frankly I don’t see one.
Instead, I see a structurally challenged retailer trying to buy a mature marketplace already fighting for relevance against Amazon – with no clear, sustainable competitive advantage to justify piling on leverage or issuing massive amounts of stock.
There’s nothing SWAN (sleep well at night) worthy about this. If anything, I think GameStop investors will find themselves tossing and turning as this spectacle unfolds.
Regards,
Brad Thomas
Editor, The Wide Moat Daily
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