GameStop’s $55.5B eBay Bid Sparks 12% Drop, Raises Funding Concerns
GameStop launched a $55.5 billion unsolicited bid for eBay, proposing $9.4 billion in cash and $20 billion in debt financing for a roughly even cash-and-stock deal. Shares slid over 12% in two sessions as analysts highlight a $26.1 billion financing gap and high leverage, prompting Michael Burry’s full exit.
1. eBay Acquisition Proposal
GameStop’s board approved a non-binding $55.5 billion offer to buy eBay at $125 per share, structured as roughly 50% cash and 50% stock. The proposal draws on $9.4 billion in existing cash and a $20 billion debt commitment from TD Securities to fund the transaction.
2. Financing and Leverage Concerns
The deal leaves an estimated $26.1 billion funding shortfall, raising questions about additional equity issuance and dilution. Critics warn leverage could exceed 5x Debt/EBITDA with interest coverage dipping below 4x, metrics deemed incompatible with disciplined capitalization.
3. Executive Tension Over Bid
CEO Ryan Cohen acknowledged eBay’s displeasure, noting the unsolicited nature of the approach has strained relations between the two companies. eBay executives have yet to signal support, leaving the proposal in a precarious, non-binding state.
4. Market Reaction and Investor Exit
GameStop shares plunged 10% on initial doubt, then fell another 2.2% as skepticism deepened. Prominent activist Michael Burry sold his entire stake, citing debt levels at odds with his investment thesis and highlighting market reluctance to underwrite the financing plan.