GameStop CEO Ryan Cohen’s $56B Plan to Take Over eBay

Ryan Cohen's Background & Chewy Origin:

• Cohen initially planned to launch an online jewelry business but pivoted to pet supplies (Chewy) after recognizing the recurring revenue model and lack of disruption in the neighborhood pet store market.
• The Chewy strategy focused on replicating a high-touch, knowledgeable pet store experience at scale, combining Amazon's supply chain efficiency with personal service (e.g., handwritten cards, 24/7 support).
• Chewy operated on negative working capital, generating billions in revenue without consuming significant capital, achieving a $3.35 billion sale in 2017 before its IPO.
• Cohen emphasizes hiring for "will over skill," prioritizing relentless drive and passion over traditional resumes, famously describing his early team as "psychopaths."
• Cohen acknowledges he would have regretted selling Chewy if he had stayed, noting the company's subsequent $20 billion IPO valuation, but views the sale as part of his path to GameStop and eBay.

GameStop Turnaround Strategy:

• Cohen joined the GameStop board in 2020 as a passive investor after the then-CEO sought a "friend" to fend off activists; Cohen demanded a controlling seat to ensure impact.
• Initial strategy attempts to replicate the Chewy e-commerce model were abandoned after one year as fundamentally incompatible with physical retail and inventory realities.
• Post-CEO appointment, Cohen shifted focus to "maniacal" cost-cutting, optimizing pre-owned retail operations, and capitalizing on the collectibles market (Trading Cards Games, sports cards).
• Key Financial Metrics (as cited):
  • Collectibles now represent 42% of revenue ($350 million).
  • Q1 revenue reached $835 million (14% year-over-year growth).
  • SG&A reduced from $228 million to $202 million.
  • Balance sheet holds $9.7 billion in cash with $333 million in free cash flow.
  • Board authorized a share repurchase program.
• Cohen leverages GameStop's physical store network (1,600 locations) for authentication, logistics, and as potential studio nodes for live commerce.

eBay Acquisition Proposal & Rationale:

• Cohen proposes a $56 billion all-stock/cash deal (50% cash, 50% stock) to acquire eBay, aiming to create a combined entity leveraging GameStop's physical network and eBay's digital scale.
• Strategic Vision for eBay:
  • Live Commerce: Identifies a $400 billion TAM for live commerce where eBay currently lags; proposes using GameStop stores as creator studios and leveraging eBay's brand for growth.
  • Digital Collectibles: Proposes building a marketplace for in-game digital items (skins, weapons), arguing this offers higher utility than the speculative NFT market.
  • Secondary Market Liquidity: Aims to deepen eBay's dominance in the secondary market for physical collectibles and refurbished tech.
• Critique of Current eBay Management:
  • Cohen claims eBay's management has stagnated GMV, active users (down 30 million), and operating earnings while significantly increasing operating expenses (now >50% of revenue).
  • He accuses the current team of alienating sellers through poor tooling, lack of direct engagement, and reliance on expensive external consultants rather than operational execution.
  • Cohen contrasts his "skin in the game" approach ($500 million personal investment, no stock sales from GameStop) with eBay's management, whom he claims makes $100 million+ in severance/parachutes without purchasing stock.
• Board Rejection:
  • The eBay board rejected the initial offer, citing "financing uncertainty" and "uncertainty" regarding the bidder's execution, while refusing to meet directly with Cohen.
  • Cohen notes a failed shareholder vote to lower the threshold for calling a special meeting from 20% to 10%.

Forward-Looking Statements & Next Steps:

• Cohen plans to proceed with a hostile approach, including potential tender offers, to maximize shareholder value regardless of board opposition.
• He asserts that the market will eventually act as a "weighing machine," rewarding the superior operational performance demonstrated at GameStop over media narratives that the company is a "meme stock."
• Cohen warns that eBay's entrenched management faces a "cliff" of $100 million+ payouts and will likely be replaced if shareholders reject the status quo in favor of the proposed acquisition.
• He highlights that antitrust concerns may limit traditional competitors from making a rival bid of this magnitude.

Market & Media Dynamics:

• Cohen argues that mainstream media and Wall Street consistently bet against GameStop and his leadership due to a bias toward established, non-disruptive corporate structures.
• He suggests media outlets must now acknowledge their past errors regarding GameStop's fundamental value to avoid losing their own credibility.
• Cohen posits that the "American" spirit of risking personal capital (as he is doing) contrasts with the "entrenched" management model favored by the current establishment.