On Tuesday, Ebay announced that its board of directors, after evaluation with financial and legal advisors, had decided to reject Gamestop’s non-binding takeover bid. The bid, which was made public in early May, valued the e-commerce platform at $55.5 billion.
In a response letter addressed to Gamestop CEO Ryan Cohen, Ebay Chairman Paul S. Pressler outlines the reasons behind the decision.
The Board, with the support of its independent advisors, has carefully reviewed your proposal and has decided to reject it, Pressler writes in the letter, continuing:
We have concluded that your proposal is neither credible nor attractive.
The board highlights several specific factors underlying the rejection. The company points to Ebay’s own future prospects as an independent entity, but also criticizes the proposed setup from Gamestop’s side.
We have considered factors such as [...] the uncertainty surrounding your financing proposal, [...] the risks and management structure of a merged entity, [...] as well as Gamestop’s governance and management incentives, the board’s response states.
Ebay further emphasizes that the business is resilient and that the current management has a clear strategy to continue driving growth and delivering long-term value to shareholders.
Questionable Financing
The board’s rejection follows a period of question marks surrounding the feasibility of the deal. Gamestop’s bid consisted of half cash and half shares. The market and analysts have previously questioned the calculation, as Gamestop’s cash and loan commitments left a financial gap of over $16 billion to cover the cash portion of the bid.
There has also been friction between the parties. Last week Ebay permanently banned Ryan Cohen’s user account on the platform, after the CEO posted advertisements with the explicit purpose of raising funds to finance the acquisition.
When the bid was first presented, Ryan Cohen stated that he was ready to turn directly to Ebay’s shareholders, a so-called hostile takeover, if the board were to reject the proposal. Whether Gamestop plans to proceed with that strategy after today’s announcement has not yet been communicated.