GameStop Prepares Bid for eBay Despite Market Cap Gap

GameStop Corp., the US video-game retailer, is preparing a bid for eBay Inc., the Wall Street Journal reported on May 1, citing people familiar with the matter.

The target is worth more than four times GameStop’s market value. Based on the previous trading day’s close, GameStop had a market capitalization of about $11 billion, versus roughly $45 billion for eBay. GameStop has also been building a stake in eBay ahead of the offer, the Journal reported. After the report, eBay shares jumped more than 10% in after-hours trading, while GameStop rose more than 5%.

GameStop plans to submit a formal offer as early as this month. If eBay’s management rejects the proposal, Ryan Cohen, GameStop’s chief executive officer, could take the bid directly to eBay shareholders in a hostile takeover attempt.

Cohen said in January that GameStop was seeking potential acquisition targets in the consumer and retail sectors. Earlier this year, the company also revised his compensation package. If GameStop meets certain targets, including reaching a $100 billion valuation, Cohen could receive stock compensation worth as much as $35 billion.

GameStop has amassed substantial firepower for a large acquisition. As of the end of March, it held about $9 billion in cash and cash equivalents, nearly double the $4.8 billion it held a year earlier.

The company also owns a sizable amount of digital assets. According to a recent Form 10-K filed with the US Securities and Exchange Commission, GameStop held 4,709 Bitcoin worth about $370 million. The company previously dismissed speculation that it had sold Bitcoin, saying the claim resulted from a misunderstanding related to posting the tokens as collateral with Coinbase Credit for a covered-call strategy.