After walking into a local GameStop, we have a few questions….
GameStop was once the last hope for physical gamers, but recent store revamps has slowly forced that out the door. GameStop went from a full store filled with games, to mostly stuffed animals, t-shirts, with a shady Pokemon card scalper in the back. But it seems to be working because apparently that’s enough for them to buy Ebay….. What in the world is going on?
GameStop went from becoming nearly totally bankrupt to being saved by some Reddit boards, to being bought by Chewie CEO, to now attempting to buy one of the largest online retailers in the world.
According to GameStop’s investor page, this isn’t entirely good for GameStop investors upfront. The offer consists of offering to buy Ebay for $124 a share, totalling $56 Billion, when Ebay is valued at just under $46 Billion. The purchase will come in “half stock, half assets” which is where the eerie news for GameStop investors come from. In a recent interview, Cohen (GameStop CEO) noted that funding for the purchase is coming from TD Bank at $20 Billion in debt, along with diluting shares in GameStop to raise funding for the rest of the purchase.
For those slightly new to stock trading, like myself, this means GameStop would issue new shares in the company to raise funds. More shares means the value of your shares fall. And the market immediately reacted to this news with GameStop stock falling over 10% in the following 24 hours.
Meanwhile GameStop has been actively taking pieces of Ebay stock and is currently up to 5% of the total stock. The only assets with more active shares in Ebay are massive institutional investors such as Blackrock and Vanguard with around 12% each. Leading up to this announcement Ebay stated that GameStop, nor their CEO, had actively been in contact with them or their investors until the proposal was made. This suggests that Cohen could be pursuing an active “hostile takeover” of Ebay if they don’t accept the initial offer. A similar tactic was nearly used when Paramount was having trouble buying WB through investor approval.
However it is normally required for companies to listen to active reasonable offers, which this appears to be. Ebay stated they will look at the value of the offer, along with the value of “GameStop stock and branding” for their investors in the deal.
Ebay is an interesting twist in the gaming world for GameStop. GameStop has been actively switching gears to Pokemon cards, merchandise, and more importantly adding Retro games to every store. However Ebay recently sold their “vault” feature, which tracks the market trends of graded cards, to PSA. But if GameStop could somehow leverage their physical stores to make buying and selling on Ebay slightly easier, that could be an interesting change.
What do you think of this ongoing craziness in the gaming and film world? Paramount buys a studio much larger than them, and now GameStop is buying an internet giant. Interesting times we live in.
