Shares of eBay EBAY fell about 4% on Monday after a Bloomberg report said GameStop chief executive Ryan Cohen is considering abandoning the video game retailer’s proposed $56 billion acquisition of the online marketplace in favour of a partnership.
According to Bloomberg News, citing people familiar with the matter, GameStop is exploring the possibility of a joint venture or strategic partnership with eBay instead of pursuing a full takeover.
GameStop shares were up about 0.1% following the report.
Partnership could focus on collectibles business
Bloomberg reported that Cohen is evaluating a proposal under which eBay would leverage GameStop’s network of roughly 1,600 retail stores across the United States.
The collaboration could help both companies strengthen their presence in higher-margin businesses such as trading cards and collectibles, areas where each has been expanding in recent years.
As part of any partnership, GameStop would also seek representation on eBay’s board, according to the report.
Neither company has reached a final decision, and Bloomberg said Cohen could still consider alternative strategies.
The companies did not comment on the report.
Acquisition proposal faced investor skepticism
The reported change in strategy follows eBay’s rejection of GameStop’s unsolicited takeover proposal in May.
At the time, eBay described the offer as “neither credible nor attractive.”
The proposed acquisition drew widespread skepticism from investors and analysts because GameStop, whose market value has fallen to about $8.6 billion, was attempting to acquire a company valued at nearly six times its own size.
Analysts also questioned the financing structure, which was expected to rely heavily on debt commitments and new share issuance.
Although GameStop holds roughly $8.4 billion in cash, many investors remained concerned about the leverage required to complete such a large transaction.
Strategic goals remain aligned
Despite their different operating models, both companies have increasingly focused on collectibles and trading cards, which have become attractive growth segments.
eBay operates an online marketplace that generates revenue by connecting buyers and sellers and collecting transaction fees, while GameStop primarily purchases inventory and resells products through its physical store network.
A partnership could allow each company to capitalize on those complementary strengths without the financial burden associated with a full acquisition.
GameStop strengthened its position in July by increasing its stake in eBay to 9.8%, making it one of the e-commerce company’s largest shareholders.
Following the investment, Cohen pledged to pursue a transaction “one way or another” after the takeover proposal was rejected.
GameStop’s renewed push comes after years of transformation.
The retailer has steadily reduced its brick-and-mortar footprint as consumers increasingly shifted to downloading games digitally.
The company also became the center of the retail-investor trading frenzy in 2021.
Investor Michael Burry, founder of Scion Asset Management, had taken an early bullish position in GameStop before the rally.
However, after the company announced its proposal for eBay, Burry disclosed that he had exited his investment, citing concerns over the amount of debt the retailer could assume to finance the acquisition.
Meanwhile, eBay continues to command a sizeable global marketplace despite facing increased competition and changing consumer shopping habits.
Shoppers spend around $80 billion annually on the platform, with approximately 136 million active buyers making purchases during the 12 months ended March 31.
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