GameStop extends pursuit of eBay despite Wall Street scepticism
Video game retailer doubles stake in online marketplace as chief executive Ryan Cohen presses ahead with quixotic deal
GameStop chief executive Ryan Cohen is pressing ahead with a long-shot pursuit of eBay despite Wall Street scepticism, quietly amassing a nearly 10 per cent stake in the online marketplace.
Cohen has been working behind the scenes in recent weeks to respond to eBay’s rejection of his $56bn cash-and-stock takeover offer in May, which criticised the deal’s financing, leverage levels of the combined group and Cohen’s own economic incentives.
“The publicity hasn’t affected my life one bit,” Cohen told the FT. “All I do is work. I want to own eBay — that’s all I’ve been thinking about.” Cohen’s attempt to buy a company fivefold larger than the video game retailer was laughed off on Wall Street, and his assertion in a CNBC interview that the deal was funded by “half cash, half stock” quickly became an online meme.
Cohen’s relentless pursuit of eBay is evidence of the changing face of corporate America. Cohen, supported by an army of retail investors who backed his swift takeover of GameStop, is attempting to swallow one of America’s most well-known online retail brands — albeit one that has stagnated while rival Amazon grew to a $1tn-plus market capitalisation.
GameStop has almost doubled its eBay stake and Cohen withdrew a bonus plan that eBay’s board criticised that could have paid him as much as $35bn. The GameStop boss has also reshuffled his legal and public relations advisers, reassembling the team that helped him seize GameStop, and has been canvassing the opinion of some of eBay’s other largest investors, according to people familiar with the matter
All of these manoeuvres could be a prelude to Cohen taking his offer directly to shareholders. “We’re keeping all our options on the table,” said Cohen. “The optimist in me tells me they should do the right thing and engage with us but the pessimist in me tells them they’re going to wait till the annual meeting. There’s a lot of steps we can take between now and then.”
Despite Wall Street’s scepticism of Cohen’s pursuit, the GameStop boss has already started drawing up plans for how he would shake up eBay if he ever gets inside the C-suite. The remedy is aggressive cost-cutting to bring eBay’s operating expenses in line with Chewy, the online pet food retailer Cohen founded, and rivals such as Wayfair.
Operating expenses at eBay have increased by 26 per cent over the five years to $5.6bn last year, while operating income has fallen by 14 per cent to $2.2bn. Despite that, shares in eBay have more than tripled over the course of chief executive Jamie Iannone’s six-year tenure, driving its market value close to all-time highs of nearly $50bn at Friday’s close.
Some analysts have, however, praised eBay’s recent performance, pointing to recent improvements in marketplace growth and a disciplined capital allocation strategy. eBay declined to comment.
Cohen revealed that he emailed Iannone in May immediately following his public takeover attempt to try to broker a meeting near eBay’s headquarters in San Jose, California. But Iannone was unwilling to meet with the man gunning for his job. “This is really a vote on who shareholders want to run the business,” said Cohen. “It’s about who they want to be the CEO — me or the current CEO.”