GMEBAY IS REAL

Added: 2026-05-10

[00:00:00]GameStop's crazy idea to buy eBay isn't so crazy, but it is risky.

[00:00:05]eBay remains a buy as fundamentals and recent MMA activity highlights its superior prospects versus GameStop, which is reaffirmed as a hold.

[00:00:15]GME's $125 a share non-binding proposal for eBay, split evenly between cash and stock, offers a 46% premium, but raises execution and synergy risks.

[00:00:29]eBay's recent growth, including a 19.5% Q1 2026 revenue surge, and strategic acquisitions like Depop, underscores its strong standalone trajectory.

[00:00:41]Cutting cost ambitions from GME could threaten eBay's momentum, and interest expense risks offset potential synergies, making eBay the better risk-adjusted play. I don't I don't actually agree with that part because uh in the proposal and in the interview of with Ryan Cohen, he says that GameStop is I think it's actually just a proposal. I don't think he says this in the interview, but he says that uh eBay is spending like almost $2 billion on marketing, and they've only increased their uh user numbers by like less than 1%, so they're actually wasting a lot of money uh trying to acquire new users.

[00:01:24]And they don't even need to do that. So, I don't agree that cost-cutting ambitions from GME could threaten eBay's momentum. I don't I don't think that's true. I think GameStop acquiring eBay could actually be the thing that brings more users to eBay potentially, and you know, making the platform better.

[00:01:41]You never know. You never know.

[00:01:44]All right.

[00:01:45]May 4th was a fascinating day for investors in both eBay and GameStop Corp. Shares of the former jumped 4.6%, while shares of the latter declined 8.3%.

[00:01:55]Yeah, I think people are shorting GameStop because of the potential dilution and uh uh you know, the debt they're going to add to the balance sheet. It's a little bit more risky of a play, but overall, it's extremely interesting. I think GameStop's business as a whole has a cap of how much it can actually grow. I mean, it's going to grow forever, but I think there's a cap of how much net income they can actually bring in and how much they can grow their revenue.

[00:02:21]But uh yeah, if they acquire eBay, I think eBay has basically like unlimited upside of how much they can grow that business and that's why you know, eBay is the target most likely.

[00:02:34]This return disparity came after the management team at GameStop announced a proposal to acquire eBay in a deal valued at $125 per share.

[00:02:42]This represents a 46% premium to the share price that eBay was trading at on February 4th, which was the day that GameStop started acquiring eBay stock.

[00:02:52]Oh yeah, I forgot that was in the investor relation thing that GameStop started acquiring eBay shares and options on February 4th.

[00:03:01]And eBay was trading around 86 bucks then, but it also had a dip in February, so potentially GameStop's been buying those options uh anywhere from, you know, $80 to $88.

[00:03:15]Potentially maybe even a little bit lower, but GameStop should have a massive gain on that option position, anywhere from like 3 to 400 million, I would imagine.

[00:03:25]From that time through today, the video game retailer has purchased a 5% economic stake in the business. However, some of this is in the form of derivatives that give it the right to buy shares.

[00:03:37]In some respects, this transaction looks absurd, but when you really think about it, there's an opportunity here.

[00:03:44]It does require fantastic execution from the management team at GameStop to play out nicely, but even though the company has struggled over the last several years, it has demonstrated an ability to cut expenses, cut expenses, and increase profits.

[00:04:02]My only concern is that it might do so at the cost of the fantastic financial performance that eBay has achieved over the last few years. That doesn't make any sense because eBay's business is declining. Sure, their revenue might be up, but overall, their assets are declining because of all the stock-based compensation and the dividends and the stock buybacks.

[00:04:23]Uh eBay's, you know, they're doing great, but because of the management team, eBay's business overall isn't growing.

[00:04:33]So, that definitely warrants some concern from investors.

[00:04:37]So much of the last several years now, I've been incredibly bearish about GameStop, and that bearishness has been right. Has it?

[00:04:45]>> [laughter] >> Has it been right?

[00:04:47]I don't know.

[00:04:48]However, back in September of last year, I ended up upgrading the stock from a sell to a hold because of this recent decline, shares are now down 6.4% while the S&P 500 is up 8.1%.

[00:05:02]But, fundamental performance for the company is certainly improving.

[00:05:06]Even better has been my call recently regarding eBay.

[00:05:09]Back in February of this year, I upgraded it from a hold to a buy.

[00:05:14]The company has been doing a fantastic job.

[00:05:18]Since then, shares have jumped 28.9%, easily outperforming the 4.9% increase that the S&P 500 saw over the same window of time.

[00:05:28]When looking at the data provided, it is clear to me that the real buying opportunity that exists here is in owning eBay.

[00:05:35]So, I do think that reaffirming it as a buy candidate here makes sense.

[00:05:40]Meanwhile, until we get some ideas to whether or not this deal will go forward, maintaining GameStop as a hold is the right choice. I mean, I think this guy was right about the first maybe like three to four years of his uh you know, bearishness on GameStop, but for the last like 3 years, GameStop has been very good, very positive. And sure, the stock really hasn't moved much, but you've had a lot of short-term price spikes that the management team took advantage of issuing the convertible bonds and the warrants and uh you know, during the 2024 squeeze doing the stock offering. So, they raised a bunch of money and the stock is doing extremely well and so is the business. So, I don't really understand how you could be bearish on GameStop for the past two to three years, I would say.

[00:06:34]In a press release issued on May 3rd, the management team at GameStop announced that it was issuing a non-binding proposal to acquire eBay in a cash and stock deal valued at $125 per share.

[00:06:47]This represented a meaningful premium over where the stock is traded in early February.

[00:06:52]And according to the terms of the proposal, half of the transaction value would be in the form of cash, while the other half would be in the form of stock.

[00:07:00]Wait, I don't I don't get that. That's Wait, what? Half cash, half stock?

[00:07:05]That doesn't make any sense. How could they do that?

[00:07:09]To be clear, there is some ambiguity here.

[00:07:13]Even if the regulatory filings were made, GameStop does not specify any exchange ratio or anything of that nature.

[00:07:20]So, for the purpose of analyzing the stock, I am assuming that the $125 per share figure is based on the value of GameStop stock as of the close of the previous trading day.

[00:07:31]Subsequent filings could ultimately change this. And since this is an early non-binding proposal, it's entirely possible that some other deal entirely could be could materialize.

[00:07:44]As part of this proposal, GameStop also made public a letter that was sent to the management team at eBay in relation to this proposal.

[00:07:53]In addition to reiterating the terms that offered up, GameStop also lambast eBay for what it considers to be some poor investment decisions.

[00:08:02]Most notably, GameStop claimed that in 2025, the online auction site spent 2.4 billion on sales and marketing expenses, and yet only added in a organic basis 1 million net active buyers from this. Yeah, that was what I was talking about at the start of this video.

[00:08:20]This is true, as the chart above illustrates, we did see only a million increase in net active buyers from 2024 to 2025.

[00:08:29]And from the first quarter of 2024 to the first quarter of 2026, the increase was only 2 million.

[00:08:36]However, half of that increase in the most recent quarter was the result of the company's acquisition of Tise AS, which was purchased in October of 2025.

[00:08:47]Uh this guy's got some pretty good analysis so far. I'm I'm enjoying this article. It's not bad.

[00:08:53]It is worth noting that in February of this year, eBay entered into an agreement to acquire a consumer-to-consumer fashion marketplace known as known as Depop in a transaction worth 1.2 billion.

[00:09:05]That should add another 7 million active buyers, around 90% of whom are under the age of 34.

[00:09:12]So, the actual size of eBay today, following the completion of that purchase in the third quarter of this year, will be even larger.

[00:09:20]The fact that management has to had to make acquisitions in order to feel growth does mean that GameStop has a point.

[00:09:28]Personally, I view the letter as somewhat antagonist and antagonistic or accusatory.

[00:09:36]I am more of the opinion that you get further with the carrot rather than the stick, but in pointing out this lackluster organic growth that eBay saw, GameStop mentioned that it plans to cut expenses in order to reduce overall costs by 2 billion.

[00:09:50]1.2 billion of that will come from sales and marketing, 300 million of that will come from product development, and 500 million of it will come from general and administrative expenses.

[00:10:02]And yeah, that's not even counting if they actually get rid of the dividend and the buybacks and the compensation, they could they could cut costs by like 5, 6 billion or more potentially.

[00:10:14]And up here it said they spent 2.4 billion on sales and marketing, so potentially they could cut even more from sales and marketing than just the 1.2 billion they're saying here.

[00:10:27]Cuz I mean, does eBay really need marketing?

[00:10:31]Everybody knows what eBay is. It's kind of like GameStop. GameStop doesn't really need marketing. Literally everyone knows what it is. So, you know, the way you're going to get people on the platform and to raise your users is by making it better.

[00:10:46]So, people actually want to sell there and or buy there.

[00:10:51]Truth be told, some cost-cutting probably can make sense here.

[00:10:55]That is especially true on the general and administrative side of things, but I do get worried when I hear about reductions in product development, especially as well as a big haircut to sales and marketing.

[00:11:08]As the chart below illustrates, eBay has actually been doing really well as of late.

[00:11:14]Yes, the 2023 through 2025 fiscal years have been something of a mixed bag, but for the first first quarter of 2026, revenue, profits, and cash flows have all increased nicely.

[00:11:26]In my previous article about the online auction site, I detailed some of the amazing strategies that the company has used in order to become more profitable.

[00:11:35]And the surge in revenue amounting to 19.5% means that further growth is likely on the horizon.

[00:11:42]I don't think you can base your opinion on one uh one little quarter.

[00:11:50]I think you have to be analyzing a full year.

[00:11:55]You know, you can have one good quarter and then who knows if your other quarters are going to be really good.

[00:12:01]I worry that in making this transaction, GameStop might undermine these efforts.

[00:12:07]However, one thing that I can say about the video game retailer is that even though it continues to struggle with declining sales, it has done a remarkable job of cutting expenses.

[00:12:17]In the chart below, you can see financial performance for the last three completed fiscal years.

[00:12:23]Although revenue has plunged, we did see a recovery from 2024 to 2025.

[00:12:29]A lot of that increase was almost certainly because of the roll out of new consoles.

[00:12:33]Those are episodic in nature, but regardless of the cause, the firm has gone from barely breaking even from a cash flow perspective back in 2023 to generating significant positive cash flows and earnings in 2025.

[00:12:48]If anybody can cut costs drastically, it is the management team in charge of it right now.

[00:12:55]In the investor documents made available by GameStop, the company claims that earnings per share would climb from 420 426 last year to 779 this year.

[00:13:05]This is in reference to eBay and would come from the aforementioned cost cutting initiatives that would play out over a 12-month window.

[00:13:13]This is a pro forma calculation, which looks like looks at what the company would be like upon completion of all cost cutting efforts.

[00:13:23]This is not factoring the prospect of additional revenue generating opportunities and other potential cost-cutting initiatives.

[00:13:31]Today, GameStop has around 1,600 stores in the US and management believes that this could play in well to the surge in popularity regarding trading cards that both companies have benefited from.

[00:13:44]However, in addition to that, there are other synergies that can be captured, which you can see in the image below.

[00:13:52]My one problem with this calculations provided by GameStop is that I do not see any adjustment here that factors in the large amount of additional net interest expense that the firm would likely incur. Yeah, the debt is going to have a a massive interest expense unless they're able to do a stock offering and pay off the debt immediately.

[00:14:13]Right now, GameStop has a net cash position of 4.85 billion. Well, it's actually way higher than that.

[00:14:20]But, the total value of the cash component of this transaction stands at 29.25 billion.

[00:14:26]Assuming a 6% interest rate on the change in net debt, this would mean around 1.61 billion of interest expense annually.

[00:14:35]That cuts away drastically at the cost of savings planned by the business.

[00:14:39]In the table below, you can see two different calculations here.

[00:14:43]One of which assumes that no synergies are captured and the other of which assumes the full 2 billion.

[00:14:50]This calculates using results from 2025 what I believe eBay will really look like after the transaction is completed.

[00:14:59]Um I don't really want to go through that. I I think uh I think Ryan Cohen knows what he's doing. I mean, obviously they would have a massive interest expense from the debt they're taking on, but I think Ryan Cohen knows what he's doing, bro.

[00:15:14]I'm not I'm not going to take some dude off uh Seeking Alpha's opinion versus Ryan Cohen, you know?

[00:15:21]Using these estimates, we can see in the chart below how the combined company will look from a valuation standpoint.

[00:15:28]This includes both with synergies and without them.

[00:15:31]I also included how GameStop was valued based on results from 2024 and 2025, as well as how eBay was valued using results from last year.

[00:15:40]Included also in the chart is a projection for 2026 for eBay on a standalone basis.

[00:15:47]What we see here is that right now neither company is particularly expensive.

[00:15:52]In fact, I would consider them both to be around the fair value range. I think GameStop's in the fair value range, but eBay, I think that's very debatable. I think that's very debatable.

[00:16:05]If synergies are not captured, however, the company combine the combined company would be rather pricey.

[00:16:12]But if everything goes perfectly, we are looking at a firm that is trading at levels that are more reasonable.

[00:16:18]I would actually consider such a company to be worthy of a very soft buy rating.

[00:16:23]But again, this assumes that the cost-cutting efforts do not disrupt the positives that we're seeing from eBay.

[00:16:30]Uh that's a little weird. That's a little weird, but okay. I don't I just don't get how he can say that they're both fairly valued and then when this deal happens that they won't be fairly valued. That doesn't make any sense because the stock price is going to re-rate when this deal happens, and you don't know how that stock price is going to react.

[00:16:50]So, like that's just a complete assumption.

[00:16:54]In the table below, you can see what the total value and implied upside or downside would be for shareholders of eBay compared to what the stock was valued at before the announcement and immediately after it.

[00:17:05]There are scenarios here where eBay could appreciate rather nicely.

[00:17:09]And in fact, in the subsequent chart, you can see how much eBay would appreciate or decline in price as shares of GameStop fluctuate also.

[00:17:18]There are scenarios where if GameStop rises materially, it would make for the better prospect of the two, but the company is not as healthy, and in most scenarios, eBay would make the superior prospect.

[00:17:32]This is definitely something for investors to take into consideration when evaluating how to approach this opportunity.

[00:17:41]Okay, takeaway.

[00:17:43]The way I view it, this transaction looks crazy at a first glance, but when you dig deeper, there's a real opportunity that exists here.

[00:17:52]That does require cost-cutting efforts to go forward as planned, and to be as effective as management at GameStop expects them to be.

[00:18:00]And it also requires that these cost-cutting efforts don't harm eBay at a time when it is doing an exceptional job.

[00:18:07]We cannot know what ultimately will happen next. We do not know that eBay issued a press release, wherein they mentioned that while they have had no discussions or outreach from GameStop prior to this proposal, they are reviewing it.

[00:18:21]That is certainly better than an outright rejection.

[00:18:24]I would venture to say, however, that they would either decline it in time, or demand a higher price.

[00:18:31]In all scenarios, I believe that eBay makes sure the better play is here.

[00:18:37]That is why I have no problem maintaining it as a buy candidate.

[00:18:40]Meanwhile, I would argue that GameStop still deserves a hold rating. That just doesn't even make any sense. Why would you have eBay a buy and not GameStop?

[00:18:49]Lit- literally makes no sense, but whatever, man, whatever. I also think GameStop's offer to eBay is a very good offer, so if they decline it, that's crazy, because I think if they do a hostile takeover, GameStop's going to get eBay for a lot cheaper than if they just accept the offer.