Key Takeaways
- Ryan Cohen is moving forward with a hostile $56 billion takeover attempt of eBay following board rejection
- Credit rating agency Moody’s projects combined debt could reach approximately $31.4 billion—a surge exceeding 400% from eBay’s current debt structure
- Free cash flow projections remain constrained despite GameStop’s claimed $2 billion in yearly cost synergies
- eBay’s leadership dismissed the proposal as lacking credibility and appeal, pointing to financing risks and operational questions
- Investor Michael Burry has liquidated his GameStop position, expressing worries about leverage and share dilution
GameStop’s ambitious $56 billion pursuit of eBay has hit a significant obstacle—and that roadblock is debt-related.
GME stock has dominated financial discussions ever since CEO Ryan Cohen unveiled the unsolicited acquisition proposal. eBay’s board swiftly turned it down, characterizing it as lacking both credibility and attractiveness. Cohen’s response was to announce a hostile takeover strategy, signaling his intent to circumvent the board and appeal straight to eBay’s shareholder base.
The proposed transaction structure involves a 50-50 split between cash and equity. Valued at $56 billion, this represents one of e-commerce’s most ambitious acquisition attempts—a significant gamble for a business with GameStop’s financial profile.
Breaking Down the Leverage Calculations
Moody’s released its analysis, and the figures present challenges. eBay presently maintains approximately $7.2 billion in debt against trailing twelve-month EBITDA near $3.1 billion, translating to gross leverage around 2.3x. That’s reasonable in isolation.
However, layering in $20 billion for transaction financing alongside GameStop’s current debt load of roughly $4.2 billion pushes total combined obligations to approximately $31.4 billion. This represents more than a 400% escalation compared to eBay’s existing capital framework.
Moody’s calculates that annual interest expenses on this new debt structure could surpass $1 billion. eBay produced around $900 million in free cash flow during 2025. GameStop contributed approximately $600 million in its most recent fiscal period.
Even when merged, the financial equation remains challenging—particularly when accounting for the upfront investment required to capture the synergies GameStop has outlined.
GameStop claims it can extract roughly $2 billion in annual synergies within twelve months post-close. The majority of these savings—60%—would derive from sales and marketing optimization, with remaining cuts divided between general administrative expenses and product development. Moody’s suggests deleveraging could reach approximately 3.25x assuming full synergy realization, though that assumption carries considerable execution risk.
Investment-Grade Status Remains Questionable
Securing investment-grade credit ratings for the merged company has been identified as a potential deal prerequisite. Bloomberg reported this outcome as highly uncertain given the substantial debt burden.
This ambiguity carries weight. Absent investment-grade ratings, financing costs would climb higher, further compressing the already-limited free cash flow margin.
GameStop has discreetly accumulated approximately 5% ownership in eBay, providing it with legitimacy to advance the proposal directly to shareholders. This positioning could trigger a proxy battle at eBay’s upcoming shareholder gathering.
In a related development, prominent investor Michael Burry has completely divested his GME holdings, pointing to concerns surrounding debt accumulation and potential equity dilution. Reports of insider selling have surfaced as well, contributing to uncertainty around the transaction.
GameStop submitted paperwork to expand its authorized Class A share count in advance of this initiative, which market observers interpret as groundwork for the stock-based financing element.
The landscape continues to evolve. Key developments to monitor include potential revised offer terms from GameStop, proxy contest developments, or announcements regarding co-financing partners.
