Early May has been busy and turbulent for the online marketplace eBay (NASDAQ: EBAY) and the video game retailer GameStop (NYSE: GME), as the latter launched an unsolicited bid to acquire the former.
Initially, the revelation was met with skepticism on account of an unusual difference in the size of the companies – GameStop’s valuation is significantly lower despite the firm positioning itself as the buyer – but more recent developments appear to be turning the saga more adversarial.
‘Big Short’ Michael Burry reacts to the GameStop-eBay saga
Specifically, Ryan Cohen – the activist investor and the man behind the bid – opined he would be able to cut approximately $2 billion in waste in a year if he manages to purchase eBay while insinuating the online marketplace’s leadership is not committed to the firm’s success.
Furthermore, in an unusual move, the billionaire claimed he had listed some items for sale on eBay itself to help fund the $55 billion acquisition. In response, his account was suspended, leading the famous short seller Michael Burry to a sardonic remark that ‘GME’s Play for Ebay just went hostile.’
Simultaneously, the move has been relatively disruptive for both companies in terms of their stock market performance, though there is simultaneously an indication that investors are skeptical about the merger’s plausibility.
The biggest move by press time on May 7 came for GME shares after Burry cleared his entire meme stock position, leading to a roughly 15% one-day drop.
What’s next for eBay stock amid GameStop saga?
Meanwhile, EBAY equity showed relatively few signs of life and even failed to rally decisively upon the initial revelation that Ryan Cohen is offering $125 per share.
At press time in the May 7 extended session, the stock is changing hands at $107.80 following a 2.75% weekly rise and a 0.32% pre-market drop.
Looking ahead, it appears unlikely that the unsolicited offer will have a profound impact on the valuation of the online marketplace. Indeed, though GameStop has signalled its bid is genuine, structural roadblocks appear insurmountable.
Still, the fact that TD Bank allegedly offered a $20 billion credit line for the purchase, paired with the fact that many investors might see Ryan Cohen’s vision to turn eBay into an Amazon (NASDAQ: AMZN) peer as enticing, makes it possible that a surge toward $125 could happen in the short term.
Elsewhere, if eBay’s attitude toward the offer remains unchanged, investors could easily compare the relative wealth of the GameStop CEO to Elon Musk’s, remember the latter’s issues with financing the Twitter deal, and decide that the impact of the bid has already been fully priced in.
Featured image via Shutterstock
