GameStop Corp. Class A(GME.US) The gamble of the $100 billion market value of the leader: Taking over eBay (EBAY.US), is it just the first step in his astronomical compensation package?

GameStop Corp. Class A (GME.US) is brewing a bold plan that could disrupt traditional M&A logic. According to sources, the struggling video game retailer is preparing to make a bid to acquire the e-commerce platform eBay (EBAY.US). Upon the news, eBay's stock price surged over 15% in after-hours trading, while GameStop Corp. Class A's stock price also rose by 8%. Currently, eBay has a market value of approximately $46 billion, while GameStop Corp. Class A's market value is close to $12 billion. Reports indicate that GameStop Corp. Class A has been quietly increasing its stake in eBay. If eBay's management resists the acquisition, GameStop Corp. Class A's CEO and largest shareholder, Ryan Cohen, may bypass the board of directors and make a direct offer to eBay shareholders. The specific details of the acquisition offer are not yet known, but reports suggest that the offer may be formally made as early as this month. This potential deal completely breaks the conventional M&A model. A publicly traded company with a market value less than a quarter of the target company is attempting a "David vs. Goliath" style acquisition of another giant, which is extremely rare in the industry. Such transactions typically require a significant amount of debt, a large issuance of stock, or both, and rely on the bet that the future earnings of the merged company will be enough to cover the costs. Cohen's Strategic Plan Cohen joined the board of GameStop Corp. Class A in January 2021 and is set to become the CEO in September 2023. Through aggressive cost-cutting measures, he once led the company to restore profitability. Faced with the impact of online shopping and digital downloads on physical stores, GameStop Corp. Class A has closed a large number of offline stores in recent years, focusing on transitioning to online, but the results have been inconsistent. During the latest holiday season, the company's revenue declined by 14% year-over-year to $1.1 billion. Nevertheless, Cohen's ambition remains significant. In January of this year, Cohen stated that GameStop Corp. Class A was looking for potential acquisition targets in the consumer and retail sectors. At the same time, the company revealed to him a mega compensation package worth around $35 billion, but the conditions for realization are extremely stringent: Cohen must increase the company's market value to $100 billion and achieve a cumulative $10 billion in EBITDA performance. Currently, GameStop Corp. Class A has reserved sufficient funds for a large-scale acquisition. As of the end of March, the company held approximately $9 billion in cash and cash equivalents, nearly double the $4.8 billion from a year ago. In addition, GameStop Corp. Class A also holds a considerable amount of digital assets: according to the recent 10-K filed with the U.S. Securities and Exchange Commission, GameStop Corp. Class A holds 4,709 bitcoins valued at approximately $370 million. The company has denied speculation that it has sold bitcoins, stating that the operation actually involves using the tokens as collateral for Coinbase Credit to support bullish options strategies, rather than selling the holdings. Since the "retail investor vs. short selling" MEME stock frenzy in 2021, the stock price of GameStop Corp. Class A has significantly declined from its all-time high. On the other hand, acquisition target eBay is also adapting to changing consumer trends. In recent years, eBay has continued to focus on businesses such as collectibles, second-hand goods, auto parts, and live auctions, aiming to further boost performance growth. On Wednesday, eBay released its first-quarter financial report, showing a 19% year-on-year revenue growth to $3.1 billion, and giving a second-quarter revenue guidance above Wall Street expectations. So far this year, its stock price has risen by over 19%. It is worth noting that the businesses of the two companies are converging. eBay's focus on collectibles and second-hand goods trading aligns highly with GameStop Corp. Class A's significant overlap in selling collectible toys, trading cards, and reselling rare games at high markups. If the two companies join forces, they may build a massive ecosystem in the gaming peripherals and collectibles e-commerce sectors. As of now, GameStop Corp. Class A, eBay, and Cohen himself have not responded to requests for comments.