eBay Rejects GameStop's $56 Billion Takeover Bid

GameStop shares fell as much as 5 percent in premarket trading after eBay rejected a $56 billion unsolicited bid from the smaller retailer. The move leaves unresolved whether Ryan Cohen, GameStop's CEO and largest shareholder, will pursue a proxy fight to force the deal or abandon the effort.

Cohen proposed paying $125 a share, half in cash and half in GameStop stock. He cited roughly $9.4 billion in cash on GameStop's balance sheet plus a conditional commitment for up to $20 billion in financing from TD Securities. The offer carried a premium of about 20 percent to eBay's recent closing price and as much as 46 percent above its February low. Cohen argued the combination would generate $2 billion in annual cost savings and allow GameStop's roughly 1,600 U.S. stores to handle authentication, fulfillment and live commerce for eBay listings.

eBay chairman Paul Pressler replied in a letter that the board had reviewed the proposal with independent advisers and found it "neither credible nor attractive." The letter listed six concerns: eBay's standalone prospects, financing uncertainty, effects on long-term growth and profitability, leverage and operational risks in a combined company, valuation implications, and GameStop's governance and executive incentives. Pressler added that eBay had delivered meaningful results in recent years and remained confident in its current management.

Analysts questioned the financing gap and the limited strategic overlap between a video-game retailer and an online marketplace. Michael Burry, the investor known for "The Big Short," sold his GameStop stake after reviewing the proposal, citing added debt and dilution risks. Cohen has said he is prepared to take the offer directly to eBay shareholders. Both companies' shares have traded with elevated volatility since the bid surfaced earlier this month.