Nicholas Mugalli
Institutional TMT & Macro Research, AI/Semiconductors/Policy
GameStop lacks the money for its eBay bid, and Ryan Cohen's interview suggests he is using retail investors as exit liquidity. The proposal offers $125 per eBay share, half cash and half GameStop stock, valuing eBay equity at $55.5 billion, with a TD Securities letter for up to $20 billion of financing. The interview sent GameStop shares lower. x.com
GameStop's eBay bid tests how long a meme-stock valuation can be turned into real economic value before gravity reasserts itself. Swapping meme equity for eBay's cash-generative marketplace is not an insane idea, but a $12 billion company offering $56 billion with $4.6 billion of cash needs a massive equity issuance that dilutes the GameStop holders behind Ryan Cohen's leverage, debt a company with no operating income cannot conventionally access, or eBay holders accepting GameStop stock. x.com
GameStop's eBay bid looks unlikely to get funded, because Ryan Cohen only gets the $20 billion of financing if the deal stays investment grade, which is not likely. Per @Stonkfather2021, buying 51% of eBay would take about $28.4 billion, covered by GameStop's $9.5 billion+ and TD Securities' $20 billion. x.com
GameStop shareholders face about 70% dilution to fund CEO Ryan Cohen's $56 billion offer to buy eBay, with no short squeeze coming. A year ago Cohen was hyping Bitcoin purchases, which raises doubts about whether he knows what he is doing. After that interview, a GameStop shareholder should sell every last share. x.com x.com x.com x.com
GameStop's $56 billion, $125-a-share bid for eBay could unlock over $100 billion of value by turning eBay from a stagnant auction site into a true Amazon rival under Ryan Cohen. Synergies span collectibles, trading cards, live commerce and store pickups, plus cost cuts and AI upgrades. Cohen's track record stands out, and the absence of any Wall Street buy rating on GameStop is a strong contrarian buy signal. x.com
A GameStop bid for eBay looks unworkable, so both stocks should fade. GameStop would need to issue about 1 billion shares, wipe out its treasury and take on heavy debt, making Elon Musk's Twitter deal look easy. The deal probably never happens, and if a real offer is made, GameStop has no chance of trading up. x.com
eBay looks overpriced at $116.50 against GameStop's takeover math, making a short cheap convexity. GameStop's original $125 offer, half cash and half stock, now implies about $116-117 after GameStop's roughly 15% drop, while a rational 10% arb spread would need a $129-130 bid. Funding that with GameStop stock needs about 20% more or heavy leverage. eBay is not a pretty asset and hardly the tip of the spear in new commerce; a higher bidder is the risk. x.com x.com
GameStop looks like a reasonable bet despite misgivings about CEO Ryan Cohen, because it holds a ton of cash and is not buying eBay. x.com
GameStop's eBay acquisition, paid half in cash and half in stock, means dilution to oblivion for shareholders. Per @ReesePolitics, Ryan Cohen's CNBC Squawk Box interview on the deal turned into a heated exchange in which Andrew Ross Sorkin was in disbelief at his repetitive answers, and his line that the details are on the website draws ridicule. x.com
Avoiding GameStop's unsolicited proposal and Ryan Cohen's weak execution leaves eBay better placed. eBay is easily worth over $100B today and should be worth much more in five years without GameStop and Cohen; Cohen is not the one to beat Amazon. x.com
GameStop's proposal to acquire eBay matters most because it would put Ryan Cohen in charge of the combined company, which should create more shareholder value than anything else. Cohen founded Chewy, now a $10B company, saved GameStop from its demise and built a fortified balance sheet. Dismissing the proposal is a rookie mistake. x.com x.com
GameStop is a short because its CEO plans to raise tens of billions of dollars to complete the $56B eBay offer, massively diluting shareholders. The narrative has flipped from the little guy squeezing hedge funds to insiders using retail as exit liquidity to hit comp packages. $5 is a fitting target, though the market cap may well hold up. x.com x.com x.com x.com x.com
