eBay shares rose 6% in Monday trading after GameStop CEO Ryan Cohen made an unsolicited $56 billion offer to buy the company — and claimed he had a plan to turn the company into “something worth hundreds of billions of dollars.”
The company’s valuation currently stands at about $48.8 billion after shares rose on Monday. Meanwhile, GameStop shares fell more than 8%, dropping its market value to less than $11 billion — meaning it is well short of its takeover target.
In a non-binding proposal, GameStop offered $125 a share in cash and stock — a roughly 20% premium to eBay’s closing price on Friday. GameStop has already quietly built up a 5% ownership stake in eBay.
EBay stock was trading at $110 per share on Monday — a sign that investors are skeptical the deal can go through.
Cohen — who became a favorite among retail investors as GameStop rose to prominence in “meme stocks” — He told the Wall Street Journal That “eBay should be worth – and will be worth – a lot of money.”
“I’m thinking about turning eBay into something worth hundreds of billions of dollars,” Cohen said, adding that he feels the company can become a “legitimate competitor to Amazon” in the e-commerce sector.
GameStop said TD Securities has set aside up to $20 billion in debt financing in a potential deal. Cohen also pledged to “deliver $2 billion in annual cost reductions within twelve months of closing” if the deal goes through.
EBay’s board confirmed on Monday that they had received the offer and would consider it.
“The Board of Directors will review this proposal with an eye to the value to be delivered to eBay shareholders, including the value of GameStop shares and GameStop’s ability to provide a binding and enforceable proposal,” the company said in a statement.
The company added: “Until the Board of Directors carefully and carefully considers the proposal, the company does not intend to comment further at this time.”
It appears some Wall Street analysts are already skeptical of Cohen’s plan, especially since eBay has been on the rise lately
“EBAY itself is in the midst of a transformation — and it’s going well,” Bernstein analysts wrote in a note to clients. “But to the extent that there are any challenges or volatility from categories like collectibles, that could put more pressure on the math. We see real challenges to structuring this deal.”
Bloomberg Intelligence analysts said likewise They argue that the “low probability of a deal” is already happening.
“Any credible offer would require significant dilution and introduce meaningful execution risk,” analysts Poonam Goyal and Sidney Goodman said.