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GameStop has now confirmed its intent to acquire ecommerce behemoth eBay, first reported over the weekend, saying in a May 3 announcement that it's making a half-cash, half-stock offer worth approximately $55.5 billion for 100% of the company. It also suggested that, should the deal go through, it intends to slash and burn eBay to "deliver $2 billion of annualized cost reductions within twelve months of closing."
Here's how that's going to work:
- ~$1.2 billion from Sales & Marketing. More spend is not producing more users on a marketplace with near-universal brand recognition.
- ~$300 million from Product Development. Product Development expense grew 11% in fiscal 2025 against revenue growth of 8%.
- ~$500 million from General & Administrative. Consolidated finance, HR, real estate, legal, IT, and professional services across the combined company.
"eBay spent $2.4 billion on sales and marketing in fiscal 2025 while only adding one million net active buyers (134M to 135M—a net increase of less than 0.75%)," GameStop said.
Article continues below"On cost reductions alone, eBay’s diluted GAAP earnings per share from continuing operations would increase from $4.26 to $7.79 in year one. Beyond cost, GameStop’s ~1,600 US retail locations give eBay a national network for authentication, intake, fulfillment, and live commerce."
More job cuts in the name of ticking up shareholder value never sounds like a good idea to me, but there seem to be more pressing questions before that line gets crossed.
As noted by Barron's (via MSN), GameStop's market capitalization sits at a little over $11 billion, and it has roughly $9.4 billion in "cash and liquid investments" it can put toward the deal. It also has a "highly-confident letter from TD Securities" for up to $20 billion in further financing—"highly confident" meaning the proposition is solid but not actually locked down.
That leaves a shortfall of, very roughly, $15 billion in GameStop's offer. GameStop could raise more funds by issuing more stock, but doing so would dilute the value of stock held by current shareholders. GameStop CEO Ryan Cohen refused to be drawn on the question in a CNBC interview, despite being pressed on it multiple times.
"There's going to be some leverage on the balance sheet in order to make an acquisition possible. But it's also going to be making a lot more money in the future than it is today, because it's going to be run a lot more efficiently," Cohen said.
"When a business is not growing users and spending $2.5 billion in sales and marketing, there's a lot of fat to cut. And the earnings power, as we laid out in our investor presentation, could be way higher, double the earnings in a pretty short period of time. And so it's a business that can take on more leverage because it's going to be making more money in the future."
I'm not an M&A pro but "leverage" typically refers to debt taken on to enable an acquisition, with the acquired company's assets used as collateral in the deal. For a more detailed breakdown of how it works, check out our analysis of the $55 billion acquisition of Electronic Arts in 2025, the biggest leveraged buyout in private equity history.
In its own press release, eBay acknowledged receipt of "an unsolicited, non-binding acquisition proposal from GameStop," and said it will review the proposal.
