CEO Ryan Cohen could be trying very hard to bring the meme-stock rally days back to GameStop (GME) stock. Otherwise, the fundamentals fail to support this move. Yet, Cohen is not looking to budge even after his offer was rejected by eBay's (EBAY) board and termed “unrealistic.” The co-founder of online pet products marketplace Chewy (CHWY) recently increased his stake in eBay to 7.8%, right on the heels of an earlier transaction on May 20, when he raised his stake in the company to 6.6% from 5%.
The market is the final arbiter, whether Cohen likes it or not, and his leverage-fueled acquisition of a company more than five times its own market cap has not enthused investors. Since the offer was made official on May 3, 2026, shares of GME are down 19.49%, while eBay shares have grown 6.03%. A classic event-driven scenario is playing out wherein the proposed acquirer's stock is getting hammered, while the acquired's stock is flat or rising.
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www.barchart.com The problem here is that in the event of a hostile takeover, the shareholders of eBay may be tempted, as there are no apparent competitive issues with the buyout proposal. However, it is replete with risks for the shareholders. Let's examine those risks.
About The Companies
A glance at the background and purpose of each company will elucidate the reasons they are not natural fits.
Founded in 1984, GameStop's core business involves selling gaming hardware such as consoles, software, and collectibles. It also has a membership program for its users called GameStop Pro as well.
Meanwhile, founded in 1995, eBay is one of the pioneers of e-commerce and one of the earliest internet marketplace success stories. It operates a global marketplace platform that connects buyers and sellers and earns revenue through transaction fees, advertising, seller services, payment processing, and authentication services.
Issues Galore
Before diving into the issues, GameStop CEO Cohen should be given due praise. Since his appointment, GME stock has been up more than 23%, and he has turned the company around to be consistently profitable. This is exactly what makes this whole eBay saga even more frustrating. Cohen's singular focus should be on increasing GameStop's operations, integrating AI, having a roadmap to increase foot traffic in the stores, and increasing profits further. Instead, he is putting the whole future of the company in jeopardy.
The first indication of this lies in the numbers. Apart from eBay being much bigger than GME in size, the merged entity will be saddled with $20 billion in debt that T.D. Securities will supposedly finance. I say supposedly because T.D. has just said that it is “highly confident” that GameStop can raise the $20 billion in debt from banks and the capital markets, unlike what Cohen is portraying in the media, that T.D. will finance the deal partly.
Speaking of debt, apart from the $20 billion, both GameStop and eBay already have substantial debts on their balance sheets. While GameStop has a long-term debt burden of $4.16 billion (roughly 44% of the company's total market cap), eBay's figure for the same stands at about $6 billion. Moreover, analysts are predicting that the combined entity's debt/EBITDA levels will exceed 10 and hurt its investment rating. Consequently, this will defeat the whole rationale of T.D. that the financing can be done at reasonable rates, considering the investment-grade credit rating will be under severe pressure.
Then, one of the avenues that GameStop has proposed for the buyout will be with its own stock. That does not inspire much confidence, considering its meme-stock history. The stock is down almost 70% since its heydays of the pandemic, and the motley band of meme-stock enthusiasts is also mostly not taken in by Cohen's latest move. Notably, Cohen's assertions of $2 billion in annualized cost savings also seem vague. For instance, the biggest component that Cohen has said he will cut is eBay's marketing expenses by $1.2 billion, without impacting growth. How, one may ask. Radio silence. The same is the case for product development and general and administrative expenses.
Finally, Cohen believes that eBay is slow at adopting AI. The truth is much different than that. Notably, eBay uses generative AI listing creations where sellers can upload a photo, and the system generates a draft title, description, and product attributes. This has moved the "time-to-list" from minutes to seconds, which significantly increases listing throughput. Then, to help sellers manage high volumes of customer inquiries, an AI Assistant generates suggested replies based on listing details. This allows sellers to respond faster, which correlates with higher buyer confidence and lower cart abandonment. Also, AI tools automatically professionalize product images, which directly impacts a listing’s click-through rate.
Thus, labelling eBay to be an AI dud will be unfair.
Analyst Opinion
A look at how analysts perceive each stock is vital.
www.barchart.com While GameStop has a "Strong Sell" rating with no coverage, EBAY stock has an overall rating of “Moderate Buy” with 31 analysts covering the stock. Out of which, nine have a “Strong Buy” rating, two have a “Moderate Buy” rating, 19 have a “Hold” rating, and one has a “Moderate Sell” rating.
www.barchart.com On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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