What GameStop proposed, and why eBay said no

GameStop, the world's largest brick-and-mortar entertainment software retailer, offered $125 per share for eBay, representing a roughly 19% premium to eBay's prior closing price of approximately $105 in New York, as reported by City A.M. The all-in valuation came to approximately $56bn.

The arithmetic alone was striking. GameStop's own market capitalisation sits just shy of $12bn, meaning the would-be acquirer is less than a quarter the size of its target. Ryan Cohen, GameStop's chief executive and the founder of online pet supplies retailer Chewy, proposed that he become chief executive of the combined entity. According to City A.M., Cohen stated he would "receive no salary, no cash bonuses, and no golden parachute" and projected around $2bn in cost savings following completion.

eBay's chairman, Paul Pressler, responded in a letter to Cohen stating that the board had "thoroughly reviewed [the] proposal and has determined to reject it," according to the correspondence reported by City A.M. Pressler cited several factors: eBay's standalone prospects, the likely impact on long-term growth and profitability, uncertainty around GameStop's governance and executive incentives, and doubts over the financing proposal.

eBay generated roughly $10bn in revenue in its most recent fiscal year and has been consistently returning capital to shareholders through buybacks. Pressler's letter emphasised that the company had "sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders," according to City A.M.

In short, the board concluded that eBay's trajectory as an independent business was more attractive than a combination with a smaller, operationally different partner on uncertain financial terms.

The financing gap: commitment letters vs. certain funds

To fund the proposed acquisition, Cohen disclosed a commitment letter from TD Securities to provide approximately $20bn in debt financing, as reported by City A.M. eBay's rejection letter specifically flagged "uncertainty regarding your financing proposal" as a concern.

The distinction matters. A commitment letter signals a bank's willingness to lend subject to conditions. It is not the same as a fully underwritten, certain-funds package. In UK takeover practice, the Takeover Code requires an offeror to have "certain funds" before announcing a firm offer; an independent adviser must confirm that the resources are available. That standard exists precisely to protect target shareholders from bids that collapse at the financing stage.

No equivalent rule applies in the United States, where eBay and GameStop are both domiciled. But eBay's board applied a similar logic voluntarily. A $20bn debt commitment, layered on top of a company with a $12bn equity value and a revenue base still heavily weighted toward physical retail, raised legitimate questions about deliverability. Even if TD Securities honoured every term of the commitment letter, the resulting leverage on the combined entity would have been substantial.

For UK operators, the lesson is direct. When evaluating an unsolicited approach, or when structuring one, financing credibility is not a technicality. Boards and their advisers will scrutinise the gap between an indicative commitment and a binding, unconditional funding package. A headline premium means little if the money behind it is conditional.

What "certain funds" means in practice

Under the UK Takeover Code, a cash offeror must have the funds available before a Rule 2.7 announcement. The financial adviser to the bidder must issue a "cash confirmation" statement. This mechanism, absent in the US framework, is designed to prevent exactly the scenario eBay's board feared: a protracted process that distracts management and destabilises the business, only for the bid to fail on financing.

SME founders weighing acquisition proposals, whether as buyer or target, should treat financing certainty as a threshold question rather than a negotiating detail.

Governance as a deal-breaker: lessons for operators

Pressler's letter raised concerns about GameStop's "governance and executive incentives." The reference was pointed. Cohen returned GameStop to profitability from 2023 through aggressive cost-cutting, according to City A.M., but the company's governance history is unusual by any standard.

In 2021, co-ordinated buying by retail investors on Reddit forums drove GameStop's share price from roughly $17 to over $480 after hedge funds had shorted the stock so heavily that more shares were borrowed than actually existed, as City A.M. reported. The episode made GameStop a global symbol of meme-stock volatility. While that chapter is not directly relevant to the merits of the 2026 bid, it forms part of the governance backdrop that any target board would assess.

eBay's board was, in effect, asking a practical question: would the combined entity's governance framework protect shareholder value, or would it introduce risks that eBay's current structure does not carry? Cohen's offer to forgo salary and bonuses may have been intended to signal alignment, but it did not address the broader governance architecture.

For any SME founder or board member receiving an unsolicited approach, the principle is transferable. Governance due diligence runs both ways. A target board has a duty to assess not just the price on offer but the quality of the acquirer's decision-making structures, incentive frameworks, and track record of capital allocation. A generous premium from a poorly governed acquirer can destroy value after completion.

What the bid says about the race to rival Amazon

Cohen has publicly criticised GameStop for embracing e-commerce too slowly, according to City A.M., and the bid for eBay was framed as a move to create a combined platform capable of challenging Amazon's dominance in online retail.

The ambition is notable regardless of the outcome. GameStop's core business remains heavily brick-and-mortar. eBay, by contrast, operates one of the world's largest online marketplaces. A merger would have combined physical retail distribution with digital marketplace infrastructure, at least in theory.

The bid signals a broader dynamic. Cash-rich or creatively financed mid-cap companies are increasingly willing to attempt large-scale M&A to reposition themselves against dominant platforms. For UK marketplace sellers and platform-dependent operators, this is worth monitoring. Consolidation among major e-commerce platforms, whether successful or not, reshapes the competitive environment in which smaller businesses operate.

eBay's rejection does not close the door permanently. Unsolicited approaches can return in revised form, and public rejections sometimes precede private negotiations. But for now, eBay's board has made a clear judgement: its standalone plan, built on marketplace improvements and capital returns, offers more value than a leveraged combination with a smaller, operationally different partner.

"[eBay has] sharpened our strategic focus, strengthened execution, enhanced our marketplace and seller experience, and consistently returned capital to shareholders," Pressler wrote in his letter to Cohen, as reported by City A.M.

The statement is both a defence and a signal. eBay believes its current strategy is working. Whether the market agrees will be reflected in the months ahead. What the episode offers immediately is a clear example of how boards weigh the practical thresholds of financing credibility, governance quality, and standalone value when an unsolicited bid arrives.