A few months ago, infamous Wall Street investor Michael Burry grabbed headlines after disclosing that he had bought up shares of video game retailer GameStop (GME).

GameStop became one of the first meme stocks in 2021 when its shares surged by 1,500% after retail investors bought its stock en masse. Prior to the mania, the company had been shorted by investors who expected its stock to keep dropping. 

Burry justified his move as a long-term value play, even going as far as arguing that GameStop could become a business similar to Berkshire Hathaway—a sentiment that was seemingly supported by GameStop CEO Ryan Cohen’s public declaration that he intended to acquire a public company that could be “transformational” for GameStop.

Months later, it turns out that the acquisition target was none other than online marketplace eBay (EBAY), a firm that currently boasts 135 million active users. The stagnating company had recently pivoted towards collectibles like sports memorabilia, trading cards, antiques, and even hard-to-find fashion items and footwear.

EBay’s board recently rejected the offer. In the rejection letter sent to Cohen, the company’s board said that the proposal was “neither credible nor attractive.” Uncertainty regarding financing and concerns regarding the viability of the combined entity were also raised. 

EBay’s stock is up nearly 5% following its rejection while GameStop’s is down 12%.

GameStop’s unsolicited bid was valued at $56 billion, financed through a combination of 50% cash and 50% stock. The offer valued eBay’s stock at $125 per share. 

Even though the offer generated media momentum, many observers questioned the transaction. GameStop currently has a market valuation of $10 billion while eBay, the company it wants to acquire, is worth nearly $50 billion, nearly five times GameStop’s size.

GameStop claimed that it has a $20 billion financing commitment from TD Bank. It also has $9 billion in cash on its balance sheet that it could potentially use for financing. That said, there’s still a sizable gap in financing. 

When pressed further for details in a CNBC interview, Cohen obfuscated, instead pointing viewers to the company’s website, which he claimed had details.

Prior to the rejection, Cohen told the Wall Street Journal that he was prepared to take the unsolicited bid directly to shareholders through a proxy fight. GameStop had taken a 5% stake in eBay.

Meanwhile, Burry had sold all of his GameStop shares once the eBay bid was announced, saying that his Berkshire thesis wasn’t compatible with the level of indebtedness required of GameStop in its acquisition bid. 

While it seems like GameStop’s acquisition bid has failed, a look into both firm’s Uniform Accounting helps us understand why GameStop chose eBay in the first place.

EBay has historically been a better business compared to GameStop. Over the past decade, the online retailer has boasted double-digit Uniform return on assets (“ROA”).

Meanwhile, GameStop had delivered declining returns, and had only managed a Uniform ROA of 0.5% and 0.4% in 2024 and 2025, respectively.

While GameStop had made attempts to redefine its business, such as pivoting to selling collectibles, its core business model is dying. Digital storefronts for games are the future, making the need for physical stores almost obsolete.

It remains to be seen how GameStop’s turnover attempt will turn out. Given the vagueness surrounding financing, investors are right to remain cautious towards the stock. 

GameStop remains to be a stock that’s far too volatile and uncertain to put money into.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research

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