GameStop’s ambitious plan to purchase eBay has been officially rejected by the online auction marketplace. The company raised several concerns, with its primary one being how GameStop would plan to fund its proposal to purchase eBay for $56 billion–especially when GameStop itself only has $9.4 billion in assets.
The eBay board of directors ultimately decided that GameStop’s proposal was neither “credible nor attractive,” citing that the company in its current setup is more than capable of delivering “long-term value” for its shareholders. Essentially, eBay is doing just fine business-wise and doesn’t need to entertain a buyout offer from GameStop.
“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,” eBay chairman Paul Pressler wrote in response to GameStop CEO Ryan Cohen’s offer.
GameStop had previously claimed that it had already secured $20 billion in debt financing–which would become a debt that eBay would have to pay if the deal went through–and its CEO has remained silent on where the rest of the billions would come from to finance the deal. Cohen would benefit enormously from an eBay takeover, as he could earn up to $35 billion in stock options if GameStop’s market value cap increased to $100 billion.
The billionaire still has the option of appealing directly to eBay’s shareholders, and purchasing their shares could open the doors for a hostile takeover of the commerce platform. GameStop itself is in a precarious position as hundreds of stores have been closed as part of the company’s efforts to become more profitable.