GameStop Corp.’s audacious proposal to acquire eBay Inc. for a staggering US$56 billion has been firmly dismissed by the online marketplace’s board of directors. In a letter to GameStop’s CEO, Ryan Cohen, eBay chairman Paul Pressler labelled the May 4 offer as “neither credible nor attractive,” raising significant doubts about the feasibility of the financing behind the deal.
Financial Feasibility Under Scrutiny
Toronto-Dominion Bank (TD) expressed a bold confidence in facilitating up to US$20 billion in debt financing for GameStop’s proposed acquisition, yet the reality of the situation seems to suggest otherwise. Larry Wieseneck, head of corporate and investment banking at TD Securities, had indicated in a letter dated May 1 that the bank was “highly confident” in its ability to support the funding. However, this confidence was contingent upon the new entity receiving investment-grade credit ratings from at least two major agencies, including S&P, Moody’s, or Fitch.
The hurdles to achieving such ratings are formidable. Just a day after GameStop’s offer, Moody’s described the proposal as a “credit negative” for eBay. According to their assessment, eBay already carried around US$7.2 billion in debt by the end of 2025—approximately 2.3 times its annual earnings before interest, taxes, depreciation, and amortisation (EBITDA). If GameStop’s US$20 billion financing were added to eBay’s existing obligations, total debt would balloon to approximately US$31.4 billion, an increase of over 400% relative to eBay’s standalone capital structure. This would push the combined company’s debt to nearly nine times its EBITDA, far exceeding the typical threshold for investment-grade ratings.
Potential Credit Downgrades Loom
Adding to the complexity, several of eBay’s bonds include change of control clauses, which could necessitate additional debt issuance to refinance them. Moody’s warned that such a move might trigger downgrades from at least two ratings agencies, potentially dropping eBay’s credit rating below the investment-grade threshold.
Though Moody’s analysis does not fully account for the approximately US$12 billion in cash reserves that both companies hold—around US$3 billion at eBay and over US$9 billion at GameStop—it does reflect the prevailing scepticism regarding the deal’s viability. Furthermore, Cohen has publicly committed to swiftly repaying debt and achieving US$2 billion in annual cost savings within a year of closing, a promise that may not sufficiently reassure investors.
Analyst Perspectives and Market Reaction
Analysts are echoing these sentiments of uncertainty. Wells Fargo’s Ken Gawrelski noted in a May 4 client report that eBay was likely to reject GameStop’s proposal given the uncertainties surrounding the financing. UBS analyst Stephen Ju commented on the doubts surrounding GameStop’s funding strategy, suggesting that shareholders would likely be doubtful about the transaction’s financial underpinnings.
Despite the challenges, TD has emerged as a significant partner for GameStop, having served as the sole bookrunner for the company’s US$2.7 billion convertible bond offering in June 2025. This relationship underscores the potential benefits for TD if the eBay acquisition were to proceed.
The Next Steps for GameStop
As of now, GameStop’s future actions remain uncertain. While Cohen may choose to adjust his bid or appeal directly to eBay’s shareholders, the immediate outlook seems bleak for “Project Sling.” eBay’s board and the wider investment community view the proposal with clear scepticism, and the hurdles to realising the ambitious acquisition appear substantial.
Why it Matters
The rejected bid not only highlights the precarious financial situation surrounding GameStop’s ambitions but also signals broader implications for the tech and retail sectors. With debt financing becoming increasingly scrutinised, companies must navigate the delicate balance between growth aspirations and financial prudence. Investors and stakeholders will be closely watching how these developments unfold, as they could reshape market perceptions and strategies in the coming months.
