Ryan Cohen’s eBay Bid Faces Financing Hurdle
CNBC reported Thursday that a key condition buried inside GameStop’s financing letter could seriously jeopardize its $56 billion offer for eBay. The condition requires any merged entity to hold an investment-grade credit rating. Analysts say that bar may be nearly impossible to meet given the deal’s proposed debt load.
The Financing Letter at the Center of It All
GameStop CEO Ryan Cohen unveiled the audacious eBay offer earlier this week. The company said it had secured a $20 billion financing commitment from TD Securities, a division of TD Bank. But CNBC’s David Faber, citing sources familiar with the document, flagged a critical clause attached to that commitment. The combined company would need to sustain an investment-grade credit profile for the financing to hold.
That single condition has quickly become the central question hanging over the entire proposed transaction.
Moody’s Delivers an Early Verdict
Moody’s Ratings did not wait long to weigh in. The agency said Wednesday the proposed deal would be “credit negative” for eBay, citing the significant debt burden the structure implies. Moody’s estimated the leverage ratio for a combined GameStop-eBay could approach nine times debt to EBITDA before factoring in any cost savings from synergies.
A leverage ratio of that magnitude would almost certainly push the merged company below investment grade. That outcome would directly conflict with the financing condition TD Securities attached to its commitment letter, potentially unwinding the deal before it progresses further.
A Mismatch Between Ambition and Balance Sheet
The scale of the proposed transaction has drawn scrutiny from the moment it was announced. GameStop’s current market capitalization sits near $11 billion, a fraction of the $56 billion price tag attached to the eBay offer. Cohen has suggested the company could issue additional shares to bridge part of the gap, but has offered little structural detail beyond that.
EBay confirmed receipt of the offer in a statement Monday. Its board said it would evaluate the proposal, a standard response that neither embraces nor dismisses the approach.
Background: Cohen’s History of Unconventional Moves
Cohen built his reputation as an activist investor by pushing traditional retailers to rethink their models. He engineered a turnaround at GameStop after acquiring a significant stake in 2020, eventually becoming CEO. His style has consistently favored bold action over conventional deal-making. The eBay bid fits that pattern. Whether the underlying economics can support it remains the open question facing investors and eBay’s board alike.
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