Why This Top Value Investor Is Advising That eBay Should Not Sell To Gamestop

• GameStop CEO Ryan Cohen offered $56 billion, or $125 per share, to acquire eBay.
• GME is planning to buy eBay using $9 billion cash, $20 billion debt, and new stock.
• Smead Capital Management sees no reason for eBay to sell to GME.

GameStop (GME) CEO Ryan Cohen’s unsolicited proposal to acquire eBay is drawing skepticism from Wall Street, including long-time eBay shareholder Smead Capital Management. 

Prominent money manager Bill Smead, whose firm has been an eBay stakeholder for nearly 20 years, is skeptical about how GME will be able to afford the deal, with eBay stock hovering around $108. 

“I don’t see any reason for eBay to sell to GameStop,” Smead, who is his firm’s chief investment officer, told Barron’s in an interview. 

Smead Capital Management, which Smead founded, owned about 1.5 million shares of eBay in the Smead Value Fund as of the end of the first quarter, a stake now worth nearly $160 million. Smead said he has owned eBay in the fund since its inception in 2008. 

GameStop’s market valuation is about $11 billion, while the takeover bid values eBay at about $56 billion, and investors are confused about how Cohen can afford the acquisition. 

Of the $56 billion, GameStop has about $30 billion lined up, including more than $9 billion in cash on its balance sheet and a $20 billion debt financing commitment from TD Securities, according to Barron’s. In an interview on Monday on CNBC, Cohen said GameStop could get the deal done by issuing more stock. 

Earlier during the day, Cohen took to X with a tongue-in-cheek response to skeptics.“I’m selling stuff on eBay to pay for eBay,” Cohen posted on X, alongside a link to his personal seller account.

Smead’s Commentary

Smead told Barron’s that if GameStop had a “legitimate offer” to buy eBay for $125 a share, eBay should consider it.

Still, he said, eBay shouldn’t be in a hurry to sell itself since it is doing just fine on its own.

Smead described eBay as “the New York Stock Exchange of preowned items,” raking in ‘‘loads of money” from transaction fees.

Retail View On eBay And GME

On Stocktwits, retail sentiment around GME and EBAY stocks stayed within the ‘extremely bullish’ territory over the past 24 hours, while message volume remained at ‘extremely high’ levels. 

One user urged not to let Cohen near eBay.

While EBAY stock has gained 54% over the past 12 months, GME shares dropped 3%.  

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