Could eBay be acquired by video game retailer GameStop?
What's the story
GameStop is said to be preparing an offer for eBay, as CEO Ryan Cohen looks to boost the struggling video game retailer's market value more than tenfold. The Wall Street Journal reported that GameStop has been quietly acquiring a stake in eBay's shares ahead of a possible bid. If successful, this would be one of the most ambitious corporate takeovers in recent retail history.
Investor reaction
eBay's shares jump 10% in after-hours trading
The news of GameStop's potential offer has already impacted the stock market. eBay's shares, which have a market cap of about $46 billion, rose by some 10% in after-hours trading. Meanwhile, GameStop's shares also gained 7%, despite the company only having a market value of nearly $12 billion. The proposed deal could be submitted as soon as later this month.
Acquisition strategy
Cohen might take proposal directly to eBay's shareholders
If eBay's board doesn't respond positively to the offer, Cohen may take the proposal directly to eBay's shareholders. The exact details of the possible offer are not known yet. Cohen has previously said he is actively looking at potential deal targets, especially in the consumer and retail space. This is part of a larger plan to expand GameStop beyond its roots in video games and collectibles.
Incentive structure
Cohen stands to gain $35B if GameStop hits $100B mark
Cohen's restructured compensation package at the start of this year gives him a strong personal incentive to follow through with his plans. He could earn stock worth up to $35 billion if certain performance criteria are met, including GameStop's market value hitting $100 billion. At the end of March, GameStop had around $9 billion in cash on its balance sheet, up sharply from $4.8 billion a year earlier.
Strategic fit
Merging operations could create a scaled consumer marketplace
The potential merger between GameStop and eBay could be driven by their overlapping customer bases and complementary product categories. eBay has been shifting its marketplace focus to collectibles and used goods, which closely match GameStop's existing customer base of video game enthusiasts and collectors. The combined entity would create a scaled consumer marketplace capable of competing at a far higher level.