eBay has turned down GameStop’s US$55.5 billion (about C$76 billion) unsolicited acquisition bid.
In a letter addressed to GameStop CEO Ryan Cohen, the e-commerce giant said it conducted a thorough review of GameStop’s offer with its financial and legal advisors and concluded that the proposal was “neither credible nor attractive.” It said it took into account a variety of factors, including: “eBay’s standalone prospects, the uncertainty regarding your financing proposal, the impact of your proposal on eBay’s long-term growth and profitability, the leverage, operational risks, and leadership structure of a combined entity, the resulting implications of these factors on valuation, and GameStop’s governance and executive incentives.”
The uncertainty surrounding GameStop’s finances is a particularly big point. When the company made the bid last week, there was a lot of scrutiny over how it would even afford it. For one, eBay’s market value is roughly four times that of GameStop’s, and for another, Cohen was vague about where all of the money would come from, simply saying it was a “cash-and-stock” offer that would likely include US$20 billion from TD Securities.
In fact, Cohen was widely mocked after a disastrous CNBC interview in which he was repeatedly asked where all of the money would come from, given that what he had outlined in the bid left him around $16 billion short of the proposed $55.5 billion. In response, Cohen simply kept parroting that it would be paid with “cash-and-stock,” which, as the meme goes, was a prime example of “the math ain’t mathing.”
Given all of that, it’s completely understandable that eBay wouldn’t be interested in the offer. Cohen previously told The Wall Street Journal that he would take his proposal directly to shareholders if his bid got rejected.
Image credit: Shutterstock
Source: eBay
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