While doubts about GameStop’s financing of a takeover of eBay are growing, the GameStop CEO responsible for it, Ryan Cohen, has announced that he wants to drastically cut jobs at eBay if it is successful: “I could run the business from my house (…) eBay doesn’t need 11,500 employees,” the businessman explained in an interview with the TBPN podcast. Cutting costs is the only way to make eBay’s business more efficient. Previously, another interview had caused a stir because, even after repeated inquiries, Cohen did not want to or could not explain where the missing around 16 billion US dollars for the takeover would come from.
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The US video game retailer announced over the weekend that GameStop wants to take over eBay for $56 billion. Before the announcement, the well-known online marketplace was worth around 46 billion US dollars, while GameStop was only worth 12 billion. According to GameStop, it has cash reserves of $9.4 billion and a financing commitment of $20 billion from bank TD Securities available for the acquisition. As part of the takeover offer, GameStop also announced that it already holds five percent of the shares in eBay. The video game retailer also promises to reduce eBay’s annual costs by a total of $2 billion within 12 months following a takeover.
In the interview with CNBC, Cohen did not specify where the missing money for the takeover would come from; his company previously stated that the rest would be financed from its own shares. But they would have to be extremely watered down. At Bloomberg, ex-investment banker Matt Levine has now calculated that GameStop’s share price would fall enormously in this case. If the eBay takeover still succeeds, eBay shareholders would hold a much larger stake in the resulting company. In a sense, eBay would take over GameStop and not the other way around. Levine also points out that GameStop currently has neither the money nor the shares to finance the purchase.
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