Ebay’s board of directors has officially rejected a $56 billion acquisition offer from video game store GameStop. According to Reuters, half of the offer was envisaged in cash and half in shares. However, this offer was neither credible nor attractive for the company. Ebay’s decision did not surprise investors; Market prices also indicated that the proposal was unlikely to be implemented.
Clear Rejection from the Board of Directors
Ebay’s independent management team expressed concerns about the financing of the offer and emphasized that the company is in a much better position with its current management. On the other hand, the $125 per share bid offered by GameStop remained well above the price at which Ebay shares are currently trading. This situation also made the market’s belief in the proposal’s chances of success seem weak.
GameStop’s proposed structure included $9.4 billion in cash and liquid assets and a debt financing of up to $20 billion through TD Bank. However, it was stated that in order to provide the financing in question, the combined company must maintain its investment grade credit rating. In the evaluation made by Moody’s, it was pointed out that a possible agreement could lead to negative credit consequences for Ebay.
GameStop’s Bitcoin Position is on the Agenda
After the offer was rejected, GameStop’s investment in significant crypto holdings, particularly bitcoin, came back into the spotlight. According to the information shared by CoinDesk, GameStop managed its bitcoin position of approximately $ 368 million with option strategies and transferred almost all 4,709 BTC to the institutional tool Coinbase Prime with the notification it made in March. Thus, the company converted its bitcoins into receivable status instead of holding them directly.
GameStop CEO Ryan Cohen previously called the Ebay venture “much more attractive than bitcoin”; This statement also opened up the issue of whether the bitcoin position can be converted into cash if necessary. Even if the disposal of Bitcoin assets is not enough for the purchase on its own, it stands out as an important trump card for GameStop to show investors that the offer is serious.
Market Approach and Investor Reactions
Ebay’s share value fell 1 percent to $107 before the market opened on Tuesday. This value was well below the offered price. GameStop shares lost 4 percent of their value. Most market players are skeptical about the implementation of the proposal.
It is observed that the offer is not supported among GameStop’s own investors. Famous investor Michael Burry, known for the movie The Big Short, sold his GameStop shares after the offer was announced, bringing up the debt burden on the company and the possible negative effects it could have on shareholders.
Ebay management stated that “with the current management, the company is on a much stronger ground in the future” and stated that the offer was far from convincing and attractive.
As a result, after Ebay’s clear stance, it is wondered whether GameStop will withdraw from the offer, increase the offer, or resort to direct communication with shareholders.
