eBay Rejects GameStop's 'Audacious' $56 Billion Bid — Days After Michael Burry's 'Capitalist Hell' Warning

eBay rejected GameStop's $55.5 billion takeover bid, stating the offer was 'not attractive or credible' amid doubts over financing. Note that eBay's market cap is nearly four times that of GameStop. eBay highlighted that under CEO Jamie Iannone's leadership, the company has ramped up growth, with the stock up 200% since Iannone took over six years ago.

'eBay's Board is confident the company, under its current management team, is well-positioned to continue to drive sustainable growth,' said eBay Chairman Paul Pressler on GameStop's proposal.

GameStop CEO Ryan Cohen's bid for eBay included $20 billion in debt financing from TD Bank. Investors were concerned about how the cash-and-stock bid for eBay at $125 per share would work for the $12 billion video game retailer. Cohen stated he has a financing commitment from TD, contingent on the combined company receiving an investment-grade rating. However, Moody's recently said the deal would be credit negative for eBay, despite Cohen arguing that the combined entity would enable cost-cutting and synergies.

eBay's rejection of the GameStop bid also comes after GameStop investor Michael Burry called the deal a 'road to capitalist hell.'

Michael Burry Offloads GameStop Position

Burry is known for netting hundreds of millions of dollars by betting against the US real estate market during the 2008 global financial crash. His trade was chronicled in the award-winning film The Big Short.

Burry had disclosed a position in GameStop earlier this year but offloaded his entire stake upon learning about the merger proposal. 'I may not last the week with my GameStop position fully intact,' Burry wrote on Substack. 'I will certainly sell to an extent, perhaps all or some but alas, no, not one.'

The Big Short investor was worried that the merger would mean GameStop would have to compete with retail giants like Amazon. Burry also added that the price offered to eBay is too high and that GameStop has better acquisition targets if they plan to buy a company anyway.

The GameStop-eBay merger would likely carry much more leverage, 'to a level of debt that borders on distressed and tends to strip competitiveness and innovation from such-stricken companies. If Ryan really wanted to compete with Amazon, he would have acquired Wayfair (70% of its own last mile deliveries and warehouses all over) along with a cash flow machine and a bunch of floats,' Burry had advised.

He had earlier praised Cohen's strategy and even described him as the investing world's successor to Warren Buffett, but said GameStop's plan to acquire eBay 'could not be more pedestrian.'

Both eBay and GameStop sell collectibles, but ​their main businesses are ⁠different. eBay earns fees by connecting buyers and sellers online without holding inventory, while GameStop buys goods wholesale and resells them through physical stores.

'If GameStop wants to do it with billions of interest expense and all manner of covenants restricting its movements, it will not be breaking new ground. It will be trotting in well-worn ruts on the road to capitalist hell,' Burry concluded.

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