GameStop CEO Cohen Rejects $35 Billion Pay Plan, Focuses on eBay Acquisition

① On Tuesday, GameStop CEO Ryan Cohen rejected a $35 billion compensation plan and stated he would focus on acquiring eBay.

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② Cohen had proposed a $56 billion cash-and-stock acquisition of eBay, which was rejected by the other party, mainly due to uncertainties in the financing plan, operational risks, and corporate governance issues.



③ GameStop is facing shareholder litigation, obstacles to its acquisition plan, and governance disputes. The withdrawal of the compensation plan aims to eliminate equity dilution and shareholder controversy.



June 24 – GameStop CEO Ryan Cohen on Tuesday refused the $35 billion compensation plan previously granted by the company and turned his focus to the plan to acquire eBay.



Cohen joined GameStop’s board of directors in January 2021 and became CEO in September 2023. Under his leadership, the company returned to profitability through cost cuts.



In January this year, GameStop announced a long-term performance-based stock option award to Cohen that was 100% tied to risk, to be unlocked in stages; full unlocking required simultaneously reaching two conditions: the company’s market value increasing to $100 billion and cumulative performance EBITDA reaching $10 billion. The award was valued at up to $35 billion.



Note: GameStop CEO’s performance-based compensation plan



The award is similar to Elon Musk’s trillion-dollar compensation plan at Tesla. Multiple media outlets and analysts pointed out that the target was “absurdly high.” For Cohen to obtain this compensation, he would need to completely transform a struggling video game retailer’s business.



From questions from various parties to shareholder complaints



After the performance award was announced in January, opposition followed. Some market analysts pointed out that there is a huge gap between GameStop’s current fundamentals and the $100 billion market value target.



Currently, GameStop’s market value is less than $10 billion, and based on Tuesday’s close, it was only $9.46 billion.



Some industry insiders also pointed out that integrating a large listed company is dangerous and full of challenges. Whether GameStop can successfully identify undervalued assets, effectively integrate them, and achieve the necessary revenue and EBITDA growth remains uncertain.



On June 16 this year, the dispute escalated into legal action. A GameStop shareholder filed a request with the court for an injunction to halt the vote on Cohen’s compensation plan at the annual shareholder meeting originally scheduled for July 7. The existence of the lawsuit means that this proposal is no longer just a governance dispute but has entered judicial proceedings.



Ambitious acquisition



At the same time, another strategic action that has attracted much attention is also proceeding in parallel.



In May this year, Cohen made a move and proposed a $56 billion cash-and-stock acquisition offer to the long-established e-commerce platform eBay, aiming to compete with Amazon in the market.
Cohen believes that by merging GameStop and eBay, he can reduce costs and identify synergies, thereby creating a larger enterprise.



Cohen has previously stated that he is not enthusiastic about GameStop, but he believes in eBay’s business model and is passionate about it.



However, the proposal was rejected by eBay, which stated it was “neither credible nor attractive.” Many investors are also skeptical about whether the acquisition can be completed.



The main reasons for the rejection of the deal include: significant uncertainty in the financing plan, operational risks in the transaction, and corporate governance issues at GameStop. Moody’s publicly stated that the acquisition proposal is “negative” for eBay’s credit because it would bring about large-scale leverage.



GameStop, with a market capitalization of nearly $10 billion, hopes to acquire a company approximately five times its size in a snake-swallowing-elephant manner. The source of acquisition funds has left investors and analysts confused. In addition, traders on prediction platforms believe there is only a 14% chance that GameStop will acquire eBay.



Nevertheless, Cohen does not intend to “leave the table.” He stated that GameStop plans to release more strategic details about the eBay acquisition this week.



Withdrawal and Pressure



On Tuesday, less than two weeks before the annual shareholders meeting, GameStop announced that the board of directors had approved Cohen’s request to formally remove the “CEO performance award” from the proxy voting statement.



Image source: GameStop filing with the U.S. Securities and Exchange Commission



Market participants believe that amid shareholder litigation, obstacles to the acquisition plan, and rising corporate governance disputes, withdrawing the compensation package eliminates a potential source of equity dilution and shareholder controversy.



This may be a pragmatic move, but the more important issue is that eBay’s board of directors has already rejected the initial offer. The subsequent focus will be on whether the acquisition plan can make progress.



After the news was announced, GameStop’s after-hours stock price was nearly flat. On the social platform Stocktwits, retail sentiment toward GameStop remained in the “bearish” range, with discussion volume at low levels. Compared with the 2021 “meme stock” frenzy period, market sentiment has become more calm.



It is worth noting that some retail investors were not convinced by the withdrawal announcement, questioning whether the withdrawal was voluntary or whether it was a retreat after anticipating a losing vote, rather than a truly noble gesture.



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