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EBay on Tuesday turned down GameStop's proposed $56 billion acquisition, saying the videogame retailer had failed to present a convincing financing plan and arguing the offer undervalued the online marketplace's ongoing turnaround.
Investors and analysts had widely expected the rejection because the proposed cash-and-stock transaction would require the much smaller GameStop to absorb a company worth several times its own market capitalization.
Shares of eBay slipped in premarket trading after the board disclosed its decision, while GameStop shares also fell as investors questioned whether Chief Executive Ryan Cohen could gather enough support for a hostile campaign.
In a letter to Cohen, eBay Chairman Paul Pressler said directors, working with outside advisers, concluded the proposal lacked credibility and did not provide an attractive path for shareholders.
GameStop did not immediately respond to requests for comment.
Cohen has argued that combining the two companies would create a broader retail platform centered on collectibles, trading cards and online commerce. He also said GameStop's U.S. stores could help handle order fulfillment and product authentication for eBay customers.
The proposal has nevertheless faced skepticism across Wall Street. Critics questioned how GameStop would finance such a large transaction and whether the businesses shared enough overlap to justify the risks.
Cohen previously said GameStop had secured a financing commitment from TD Bank, though the arrangement depended on the combined company maintaining an investment-grade credit profile.
Moody's warned last week that the transaction could weaken eBay's balance sheet because of the increased leverage required to complete the deal.
Under Chief Executive Jamie Iannone, eBay has focused on categories including luxury goods and collectibles as part of a broader effort to strengthen growth and improve shareholder returns.
The unusual pursuit has drawn intense attention from retail investors who still view Cohen as a central figure from the 2021 meme-stock frenzy.
Some GameStop shareholders, however, have expressed concern that a debt-heavy acquisition could dilute existing investors and distract management from the retailer's recovery strategy.
EBay reiterated that its current leadership team remains capable of delivering sustainable expansion without pursuing a merger with the videogame chain at this stage
