U.S. video game retailer GameStop is considering scrapping its bid to acquire eBay in a deal valued at $56 billion (about 79.2 trillion won) and instead forming a joint venture with eBay or pursuing a business alliance to leverage both companies' distribution networks.
On the 10th (local time), Bloomberg and Reuters said GameStop CEO Ryan Cohen is weighing a plan to withdraw the eBay takeover offer and pursue a partnership or a joint venture between the two companies. GameStop surged in 2021 as individual investors piled into the stock, making it a symbol of the so-called "meme stock" frenzy. More recently, it has been expanding beyond traditional video game retail into trading cards and collectibles.
Specifically, one option would have eBay make use of roughly 1,600 GameStop brick-and-mortar stores across the United States. Through this, the two companies aim to expand market share in relatively higher-margin categories such as trading cards and collectibles. If a partnership is struck, GameStop is also said to want to place its own representative on eBay's board.
However, a final decision on abandoning the acquisition has not been made. Bloomberg noted that Cohen could still revisit the acquisition or other alternatives. GameStop and eBay did not issue separate comments on the reports.
Back in May, GameStop proposed acquiring eBay for about $56 billion (about 79.2 trillion won), offering $125 (about 176,800 won) per eBay share, split evenly between cash and GameStop stock. At the time, GameStop argued that combining the two would allow them to compete with Amazon, the world's largest e-commerce company. But eBay's board rejected GameStop's proposal that same month, calling the bid difficult to trust and unattractive to shareholders.
Industry reaction to GameStop's plan to buy eBay was skeptical. When the bid was made, eBay's market capitalization was about four times GameStop's. GameStop held about $9.4 billion (13.29 trillion won) in cash and liquid investment assets and had a nonbinding commitment from TD Securities to arrange up to $20 billion (about 28.29 trillion won) in financing. However, conditions such as the merged corporation needing an investment-grade credit rating raised doubts about GameStop's ability to actually finance the purchase of eBay, which is larger in scale.
Even so, GameStop pressed ahead with the bid. GameStop's equity stake in eBay rose from about 5% at the time of the offer to 6.6%, and last month increased to 9.8%. According to U.S. Securities and Exchange Commission (SEC) filings, GameStop holds 43.4 million eBay shares, making it one of eBay's major shareholders. With eBay also cultivating collectibles as a growth business, if GameStop opts for a joint venture or partnership instead of an acquisition, that area is likely to become the core of their collaboration.