GameStop CEO Ryan Cohen's $56B Plan to Take Over eBay

Ryan Cohen built Chewy by replicating the neighborhood pet store experience online at scale, using Amazon as a supply chain model while operating on razor-thin margins where pennies determined success or failure. He personally managed Google AdWords campaigns until the early morning hours and negotiated directly with all major suppliers, treating a supplier's refusal to deal with him again as confirmation he had secured the right price. Chewy ran on negative working capital, consumed relatively little capital, and sold in 2017 for 3.35 billion dollars before going public at roughly 20 billion dollars, far above what investment bankers had projected at the time of the sale.

Cohen's initial GameStop thesis rested on the company surviving long enough to benefit from an upcoming PlayStation and Xbox console cycle. GameStop had been heavily shorted and expected to go bankrupt for approximately 15 years. After crossing the 5 percent ownership threshold Cohen filed a 13D rather than a 13G, signaling active intent, a distinction significant enough that the GameStop CEO called him directly to ask which filing he had made. Cohen joined the board in early 2021 alongside two Chewy colleagues, the stock surged, short-selling hedge funds were forced to cover, and GameStop raised 1.7 billion dollars that eliminated all company debt.

Cohen's first instinct as a board member was to apply the Chewy playbook by hiring e-commerce talent from Chewy and Amazon, a move he later concluded was wrong. After becoming CEO he shifted to aggressive cost-cutting and operational focus. Collectibles grew to 42 percent of GameStop revenue and became a category where GameStop is now a market leader, while software shrank to a very small share of the business. GameStop now accepts PSA-graded trading cards rated eight and above for cash trade-in, extending its core secondhand model into that category. In the most recent quarter the company generated 350 million dollars in free cash flow out of 835 million in total revenue, grew revenue 14 percent year over year, cut SG&A from 228 million to 202 million dollars, and holds 9.7 billion dollars in cash with a board-authorized share repurchase in place.

Cohen is now attempting to acquire eBay, which he views as complementary to GameStop across the secondary market, collectibles, consumer liquidity, and refurbished technology dimensions. He has followed eBay for a long time and credits its first-mover advantage with making it the de facto online collectibles marketplace, capable of competing even against Amazon. eBay's business has stagnated since COVID, with active users down 30 million, GMV down, operating earnings down, and revenue essentially flat. Operating expenses now exceed half of revenues for a business that carries no inventory, and the post-Donahoe era spanning roughly 11 years has seen every important metric decline. eBay's current CEO has not purchased a single share in the open market, has been selling tens of millions of dollars of stock, and stands to receive over 100 million dollars as a golden parachute if he exits.

Cohen's acquisition offer is structured as 50 percent cash and 50 percent GameStop stock at a premium to his purchase price, with the total deal size in the range of 56 to 60 billion dollars. He is committing 500 million dollars of his own money to the transaction. eBay's board rejected the offer citing financing uncertainty, but Cohen argues the deal would be financed off eBay's own balance sheet, meaning any financing eBay claims GameStop cannot obtain is financing eBay itself could not obtain either. He has attempted to meet directly with eBay's CEO and board members and says neither will take the meeting.

Cohen's three-pillar strategic case begins with cutting approximately 2 billion dollars from eBay's roughly 5.5 billion dollar operating cost base, which includes 2.4 billion in sales and marketing that has produced essentially no user growth. The second pillar is a major expansion into live commerce, a market Cohen sizes at 400 billion dollars and growing in the United States alone. eBay's existing live commerce attempt attracts only a few hundred viewers per stream due to a cumbersome seller application process, and Cohen argues GameStop's roughly 1,600 store locations could be repurposed as studios, fulfillment centers, and logistics nodes for content creators. The third pillar is building a marketplace for in-game digital items such as skins and weapons, assets Cohen distinguishes from NFTs by their genuine in-game utility and which he believes could ultimately exceed eBay's existing physical collectibles business in addressable market size.

Cohen argues incumbent eBay management could never execute on live commerce or gaming marketplaces at scale, and that large strategic acquirers would face antitrust obstacles, leaving his offer as the most credible path to unlocking value. He has stated he will pursue a hostile bid or tender offer if necessary and will not walk away. The threshold to call a special shareholder meeting at eBay is currently 20 percent of shares outstanding, and a recent vote to lower that threshold to 10 percent failed but was described as close.