eBay’s board of directors today rejected GameStop’s $55.5 billion offer to buy the company.
“We have concluded that your proposal is neither credible nor attractive,” eBay Chairman Paul Pressler wrote in a letter to GameStop CEO Ryan Cohen. Pressler said the board and its independent advisors thoroughly reviewed GameStop’s unsolicited bid and found numerous problems.
“We have taken into account such factors as 1) eBay’s standalone prospects, 2) the uncertainty regarding your financing proposal, 3) the impact of your proposal on eBay’s long-term growth and profitability, 4) the leverage, operational risks, and leadership structure of a combined entity, 5) the resulting implications of these factors on valuation, and 6) GameStop’s governance and executive incentives,” Pressler said.
GameStop made the surprising offer last week. eBay’s rejection “could lead to a hostile bid” because Cohen has “said he was willing to take the offer directly to eBay shareholders, possibly by calling a special meeting,” Reuters wrote.
Cohen struggled in an awkward CNBC interview to explain how GameStop would pay for the bigger company. eBay’s market capitalization is over four times larger than GameStop’s.
GameStop said it was on track to secure up to $20 billion in debt and offered to buy eBay for $125 per share, half in cash and half in GameStop stock. But as CNBC hosts pointed out, the numbers provided by GameStop didn’t add up to enough to cover the full $55.5 billion.
The rejection letter’s mention of “GameStop’s governance and executive incentives” seems to refer to Cohen’s performance-based stock option award. Cohen receives no salary or other guaranteed pay but could make $35 billion if GameStop hits a $100 billion market capitalization and $10 billion in cumulative earnings. GameStop’s current market capitalization is about $10.2 billion.
We contacted GameStop and will update this article if it provides a response.
Cohen not “passionate about GameStop”
Cohen said in an interview with Business Insider that he would prefer to be the CEO of eBay than the CEO of GameStop. “I did not want to be the CEO of GameStop. I want to be the CEO of eBay,” he said. “I’m passionate about eBay. I believe in eBay’s business. I wasn’t passionate about GameStop. That’s the difference.”
Cohen claimed that eBay could become more successful by dramatically cutting sales and marketing costs, and by using GameStop’s 1,600 US stores as “a national network for authentication, intake, fulfillment, and live commerce.” But eBay’s board told Cohen that the company can succeed with its current plan.
“eBay is a strong, resilient business that has delivered meaningful results over the past several years,” the board’s letter to Cohen said. “We have sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders. With its differentiated global marketplace and a clear strategy, eBay’s board is confident that the company, under its current management team, is well-positioned to continue to drive sustainable growth, execute with discipline, and deliver long-term value for our shareholders.”
Cohen has been selling various personal items on eBay in a humorous attempt to raise money for the $55.5 billion offer. “I’m selling stuff on eBay to pay for eBay,” he wrote.
Cohen’s account was suspended last week, but eBay has since allowed him to resume the sales. “Cohen’s eBay account was initially flagged for suspicious activity by eBay’s internal artificial-intelligence tool, leading to an automatic ban, a person familiar with the matter told MarketWatch. But after further review, his account was reinstated and he is now able to buy and sell again,” MarketWatch wrote.
A set of GameStop store signs being sold by Cohen has been bid up to nearly $15,000. A Halo 2 Master Chief statue is fetching almost as much, and a Ken Griffey Jr. rookie card has a high bid of over $11,000. With a day left on Cohen’s auctions, there is hope that final prices will be even higher. It’s not $55.5 billion, but it’s a start.
