EBay shares jumped 9% in premarket trading on Monday. GameStop made a formal offer to buy the e-commerce company for $125 per share. This values the deal at $56 billion. The bid quickly raised questions about how GameStop, with a market value under $12 billion, could finance the purchase of a company worth about $50 billion. GameStop shares first rose on the news. Then they dropped 5% as investors considered the risk of share dilution in the proposed financing.
GameStop plans to pay for the deal with a mix of cash and stock. The company has about $9.4 billion in cash and investments. It also includes a letter from TD Securities stating that the bank can help arrange another $20 billion in financing. Even with these resources and the value of GameStop’s current shares, there is still a gap of at least $14 billion. To close this gap, GameStop would likely need to issue a large amount of new stock. This could dilute the value for current shareholders. This concern seems to be behind the drop in GameStop’s stock price.
For eBay, the deal makes more sense financially and strategically. The offer is well above eBay’s market value before the announcement. That value had already risen nearly 50% over the past year. GameStop says it could cut $2 billion in costs within a year after the deal closes. It points to eBay’s $2.4 billion in sales and marketing spending in 2025. These efforts only brought in 1 million new active buyers and are a sign of inefficiency. Both companies could also benefit from working together in the collectibles market. They both already have strong customer bases there.
GameStop revealed it already has about 5% economic exposure to eBay through derivatives and its ownership of some of its stock. This means GameStop was interested in buying eBay before making the formal offer. The company has a track record of raising money by issuing new shares. This is the kind of financing this big deal would need. Investors saw this approach during the 2021 meme stock trading surge.
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