Bloomberg says GameStop could propose collaborating with eBay in some way other than a merger. Some analysts doubt whether eBay would benefit much from that sort of deal.
Shares of GameStop are down significantly from their high point of the meme-stock era.
GameStop CEO Ryan Cohen is reportedly weighing whether to back off his plan to buy eBay outright and to find a different way to work with the online auction site instead. But some analysts say the benefits to eBay from such a partnership aren't so obvious.
Bloomberg on Monday reported that Cohen is now "considering proposing a partnership or joint venture that would enable eBay to leverage GameStop's roughly 1,600 U.S. retail locations." GameStop $(GME)$, in turn, would try to get a spot on eBay's $(EBAY)$ board, Bloomberg said.
GameStop and eBay did not immediately respond to requests for comment. Bloomberg said Cohen has not yet finalized any decision.
The news arrives a little more than three months after the video-game retailer made its $56 billion offer to buy eBay, which eBay rejected several days later. Analysts have questioned how the deal would work, given that GameStop, with a market cap of around $8.6 billion, is much smaller than eBay, which Wall Street believes is worth nearly $50 billion.
Bill Smead, the founder and chief investment officer of Smead Capital Management, as well as a longtime investor in eBay, told MarketWatch that Cohen was smart to be interested in the site. But he said Cohen didn't have the money or the proper vehicle to acquire eBay.
"You can't do what you can't do," Smead said. "They're switching to what they maybe think they can do. He switched to being an activist, is basically what it sounds like."
Arielle Feger, an analyst at eMarketer, said she wasn't surprised by Monday's report and noted that Cohen appeared to be scaling back his ambitions. She said that a physical presence in GameStop stores could help eBay expand further into trading cards and collectibles, an area where GameStop has expanded as well. But beyond that, she said, the gains for eBay didn't exactly seem clear.
"GameStop has closed hundreds of stores in recent years, which means the physical footprint that would presumably be the centerpiece of this partnership is already shrinking," she said over email.
"There's also a potential brand risk for eBay," she continued. "Partnering too closely with a more niche retailer like GameStop could limit the perceived breadth of eBay's marketplace or create friction with sellers and customers who don't see much relevance in the partnership."
Shares of GameStop were down 1.4% on Monday, while eBay's stock fell 3.2%.
GameStop's stock has fallen about 29% since May 1, when the Wall Street Journal reported that the company's bid for eBay was in the works. In recent years, GameStop has struggled with the rise of online gaming. Its shares rocketed higher in 2020 and early 2021 as retail investors turned the company into one of the original meme stocks, but they're off nearly 80% from their highest point of that era.
The company has a 9.77% stake in eBay, according to FactSet. Last month, shareholders approved a proposal that would allow the retailer to issue more stock related to a potential offer for eBay. In June, GameStop said its board approved a $2 billion stock-buyback plan.
Although GameStop has closed stores over recent months, Feger said its bricks-and-mortar presence would hold the greatest appeal to eBay. But she also noted that there could be bigger retailers out there that have more overlap with the auction site.
"It's a more pragmatic pitch, but eBay still has to be convinced that GameStop's physical presence would add meaningful value to its business," she said.
-Bill Peters
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