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