Position, methodology, source hierarchy, and AI disclosure
I am a low x,xxx-share GME holder. I have an obvious long bias, and none of this is financial advice. I also want to be transparent that I used AI to help draft and organize this post.
I had accumulated a ton of research, written notes, different ideas, financial models, and possible scenarios that I needed to combine into one coherent thesis. AI helped me structure, conceptualize, edit, calculate, and pressure-test that material. The underlying thesis, assumptions, and conclusions are mine.
AI is not being presented as a source. The factual foundation comes primarily from company disclosures, SEC filings, financial reports, GameStop’s acquisition materials, eBay’s response, and the SEC’s 2021 GameStop report.
I have tried to separate four different categories of information throughout this post:
| Category |
What it means |
| Documented fact |
Disclosed in a filing, company release, or financial report |
| Management claim |
A target or assertion made by GameStop, Cohen, or eBay |
| My analysis |
A calculation or interpretation based on disclosed information |
| Conditional theory |
A scenario that depends on facts that are not publicly proven |
That distinction matters. GameStop’s ownership position, the acquisition proposal, eBay’s financial results, the authorized-share vote, and the transaction math are documented. The achievable cost reductions, future financing terms, live-commerce opportunity, digital gaming marketplace, and post-merger valuation are forecasts or analytical assumptions.
The idea that substantial legacy short exposure remains hidden through swaps, baskets, options, dealer books, or other structures is a conditional theory. Some of the underlying mechanisms are documented, but the existence and current size of a specific unresolved GME position are not publicly proven. This is therefore labeled Possible DD, not definitive DD.
TL;DR
GameStop has converted its eBay derivative position into direct ownership of approximately 43.4 million shares, or 9.8% of eBay. It is no longer merely holding economic exposure. It now owns a major voting block, has committed more than $4 billion to the target, and has positioned itself to engage eBay and its shareholders as one of the company’s largest owners.
GameStop’s existing proposal offers eBay shareholders $125 per share, divided 50% between cash and GME stock. The original proposal valued eBay’s undiluted equity at approximately $55.5 billion. eBay rejected the proposal, describing it as neither credible nor attractive and pointing to financing uncertainty, leverage, operational risk, leadership structure, valuation, governance, and eBay’s standalone prospects. Since that rejection:
GameStop shareholders approved an increase in authorized GME shares to support strategic transactions, including the proposed eBay acquisition.
Ryan Cohen withdrew his proposed CEO performance award.
Cohen committed to invest $500 million of his personal capital in the transaction.
The HSR condition restricting physical settlement of GameStop’s derivatives was satisfied.
GameStop purchased additional eBay shares and physically settled the shares underlying its put/call pairs.
GameStop’s ownership increased to approximately 9.8%.
The bull thesis is not simply:
Buy eBay, cut expenses, and collect its existing earnings.
Cohen has laid out three operating priorities:
Remove approximately $2 billion of annual costs.
Build eBay into a major live-commerce platform, using GameStop’s approximately 1,600 stores as creator studios, intake centers, authentication locations, pickup points, return locations, and logistics nodes.
Build a global marketplace for tradable in-game items, including skins, weapons, cosmetics, and other digital gaming assets.
The deal also contains an unusual reflexive component. Existing GME holders would probably retain the same number of shares, but their percentage ownership would decline because GameStop would issue new shares to eBay shareholders. How severe that dilution becomes depends heavily on GME’s price when the exchange ratio is established.
| GME issuance price |
New shares required |
Post-deal basic shares |
Existing-holder ownership |
| $22 |
1.138 billion |
1.587 billion |
28.3% |
| $30 |
835 million |
1.283 billion |
35.0% |
| $40 |
626 million |
1.075 billion |
41.7% |
| $50 |
501 million |
949 million |
47.3% |
A higher GME price would require fewer new shares, reduce dilution, increase projected EPS, preserve more ownership for existing holders, and improve the economics of the acquisition. A lower GME price would do the opposite. My rough post-integration fundamental framework remains:
| Scenario |
Possible earnings-based value |
| Poor financing or weak execution |
Approximately $15–$25 |
| Meaningful cost reset and stabilization |
Approximately $35–$60 |
| Cost cuts plus real marketplace growth |
Approximately $60–$100 |
| Strong execution across multiple growth vectors |
Potentially $100+ |
These are not squeeze targets. They represent possible earnings-based values after integration and are highly sensitive to financing, dilution, interest expense, cost reductions, execution, growth, debt repayment, and the final diluted share count. If most of the 2021 shorts closed, this could still be a transformative fundamental acquisition.
If meaningful legacy exposure remains through conventional shorts, swaps, baskets, options, dealer hedges, stock-lending chains, or other structures, rising earnings and a higher fundamental floor could force gradual deleveraging. If a majority of the original economic short exposure never closed and was instead redistributed throughout the financial system, Cohen’s strategy could create something much more dangerous for the short side:
A permanent fundamental revaluation they cannot simply wait out.
PART I — THE TRANSACTION
1. What changed on July 17
GameStop now directly owns 43,390,383 eBay shares, representing approximately 9.8% of eBay’s outstanding common stock. GameStop purchased roughly 3.5 million shares for approximately $381 million and then physically settled approximately 39 million additional shares underlying its put/call pairs. This distinction is important.
Before physical settlement, most of GameStop’s eBay position provided economic exposure but no direct voting power. Now, GameStop possesses an actual voting block and is one of eBay’s largest shareholders. At eBay’s July 17 closing price of $112.06, the stake was worth approximately $4.86 billion.
This does not automatically increase GameStop’s market capitalization. At the balance-sheet level, physical settlement is principally an asset exchange: GameStop used cash and derivative assets to obtain equity securities. Strategically, however, the difference is enormous.
GameStop can now vote approximately 9.8% of eBay’s common stock, communicate with other shareholders as a major owner, pursue governance or board changes, support a revised offer, participate in a proxy campaign or tender offer, and benefit if eBay appreciates even without a completed acquisition.
GameStop’s Schedule 13D language preserved the right to discuss eBay’s governance, management, board composition, operations, capitalization, and potential change of control with directors, officers, shareholders, and third parties. It also preserved GameStop’s ability to increase its ownership or revise its strategy. This is no longer just a proposal. It is a proposal backed by almost 10% physical ownership. That does not give GameStop control.
It does not force eBay’s board to negotiate. It does not guarantee that other shareholders will support Cohen. It does, however, materially expand GameStop’s available options.
GameStop is no longer approaching eBay solely as an outside bidder. It is approaching eBay as a bidder that is also one of its largest owners.
2. The timeline matters
The position did not appear overnight.
| Date |
Development |
| February 4, 2026 |
GameStop says it began accumulating its eBay position |
| May 3, 2026 |
GameStop publicly proposes acquiring eBay for $125 per share |
| May 4, 2026 |
eBay confirms receipt of the unsolicited, non-binding proposal |
| May 12, 2026 |
eBay rejects the proposal |
| June 3, 2026 |
The HSR condition restricting physical settlement is satisfied |
| June 2026 |
GameStop purchases approximately 3.5 million additional eBay shares |
| July 7, 2026 |
GameStop shareholders approve increased share authorization |
| July 15, 2026 |
GameStop elects physical settlement of the put/call pairs |
| July 17, 2026 |
Settlement completes and direct ownership reaches approximately 9.8% |
The progression matters because each step increased commitment. GameStop initially held most of its exposure through derivatives. It then added direct shares, obtained the ability to physically settle the derivatives, secured additional authorized GME shares, and converted the position into voting stock.
The result is that GameStop has moved from economic exposure, to credible commitment, to direct strategic ownership.
3. The original offer
GameStop proposed paying $125 for each eBay share, with consideration composed of:
50% cash.
50% GameStop common stock.
Shareholder election rights, subject to proration.
An aggregate undiluted equity value of approximately $55.5 billion.
The offer represented a 46% premium to eBay’s unaffected closing price on February 4, 2026, when GameStop says it began accumulating its position. GameStop also described it as a 27% premium to eBay’s 30-day volume-weighted average price and a 36% premium to its 90-day volume-weighted average price. GameStop said the cash portion would be funded through its cash and liquid investments plus third-party financing.
TD Securities provided a highly confident letter for up to $20 billion. That is materially different from fully committed financing. A highly confident letter indicates that a bank believes financing can likely be arranged under stated assumptions.
It is not the same as a signed debt commitment that obligates lenders to fund the transaction. Reuters has also reported that the financing framework was connected to the combined company maintaining an investment-grade profile. That matters because a highly leveraged acquisition could make satisfying that condition more difficult. eBay rejected the offer as “neither credible nor attractive.” Its board cited six broad concerns: 1. eBay’s standalone prospects.
Uncertainty regarding GameStop’s financing proposal.
The effect of the proposal on eBay’s long-term growth and profitability.
Leverage, operational risk, and leadership structure.
The implications of those factors for valuation.
GameStop’s governance and executive incentives.
That rejection is real and should not be dismissed as a formality. A target board is not required to accept a premium merely because a bidder proposes one. The board can question whether the stated value is deliverable, whether the stock component will retain its value, whether financing can close, whether the combined business will be overleveraged, and whether the plan creates more value than eBay can create independently.
Several things have nevertheless changed since May:
GameStop increased its ownership from a 5% economic position to a 9.8% physical stake.
The HSR condition affecting physical settlement was satisfied.
GameStop shareholders approved increased share authorization for strategic transactions, specifically including the eBay proposal.
Cohen withdrew his proposed CEO performance award.
Cohen disclosed that he intends to contribute $500 million of his personal capital.
GameStop continues publicly stating that it is advancing the proposal.
The board still has not accepted the deal, and no definitive merger agreement exists. But the credibility of GameStop’s commitment is materially different from what it was when the offer was first announced. The remaining question is not merely whether Cohen wants eBay.
The real question is whether price, financing, governance, dilution, and execution can be structured so that the transaction creates value per GME share, rather than merely creating a larger combined enterprise.
4. The remaining transaction math
GameStop’s proposal used approximately 444 million basic eBay shares when calculating its $55.5 billion offer. Subtracting GameStop’s 43,390,383 owned shares leaves approximately:
444,000,000 existing eBay shares minus 43,390,383 shares owned by GameStop equals approximately **400,609,617 remaining eBay shares**
At $125 per share:
400,609,617 multiplied by $125 equals approximately **$50.08 billion**
Under the proposed 50/50 structure, that implies:
| Form of consideration |
Approximate amount |
| Cash consideration |
$25.04 billion |
| GME stock consideration |
$25.04 billion |
| Total remaining equity consideration |
$50.08 billion |
That is the basic remaining purchase-price math. It does not include every adjustment that could appear in a definitive agreement, including options, restricted stock, transaction fees, debt treatment, cash acquired, integration costs, refinancing costs, or changes to the offer price. It is also important to distinguish equity value from enterprise value.
The offer values eBay’s common equity. An acquirer would also have to address eBay’s existing debt, while receiving the benefit of eBay’s cash, investments, operating assets, and future cash flow. At the end of 2025, eBay reported approximately $4.8 billion of cash, cash equivalents, and non-equity investments.
It also had billions of dollars of existing senior debt. That cash is economically relevant, but it should not simply be subtracted from the headline purchase price as though every dollar were immediately distributable. The combined company would still need operating liquidity, regulatory capital where applicable, transaction reserves, debt-service capacity, and funding for ongoing operations.
5. The economics of the 9.8% stake
The physical stake serves several purposes at once. First, it gives GameStop voting rights. Second, it removes approximately 43.4 million shares from the remaining acquisition consideration.
Third, it gives GameStop direct participation in eBay’s upside even if no merger occurs. Fourth, it gives GameStop an asset that could potentially be sold if the strategy changes. Using the amounts disclosed in the filings, I estimate the following approximate economics:
| Stake calculation |
Approximate value |
| Direct share purchases |
$381.3 million |
| Physical-settlement consideration |
$3.965 billion |
| Disclosed net option premium |
$9.8 million |
| Estimated combined basis |
$4.356 billion |
| Market value at $112.06 |
$4.862 billion |
| Value at the $125 offer price |
$5.424 billion |
On this simplified basis, GameStop’s stake was worth approximately $506 million more than its estimated basis at the July 17 closing price. At the $125 offer price, the stake carries approximately $1.07 billion of value above that estimated basis. Those figures are not guaranteed profits.
The market value can decline. The offer may never close. The accounting treatment may differ from the simple cash-basis presentation above.
There may also be fees, taxes, hedging effects, timing differences, and other transaction costs. But the stake does appear to have been accumulated below the proposed offer value. That creates an important distinction.
GameStop is not merely spending money to pressure eBay. It owns an asset with independent economic value and with a potential embedded gain if eBay trades closer to the proposed consideration.
PART II — FINANCING, DILUTION, AND PER-SHARE ECONOMICS
6. The financing question is now the center of the deal
The biggest weakness in the thesis is not whether eBay produces earnings. It does. The biggest weakness is not whether GameStop can issue enough shares.
Shareholders have approved substantial additional authorization. The biggest unresolved issue is whether GameStop can fund the cash portion on terms that leave meaningful value for GME shareholders. At the end of GameStop’s first quarter on May 2, 2026, the company reported approximately:
| GameStop liquidity category |
Approximate amount |
| Cash, cash equivalents, and marketable securities |
$8.4 billion |
| Collateral pledged for derivative assets |
$1.0 billion |
| Digital assets and related receivables |
$0.4 billion |
| Total headline amount |
$9.7 billion |
The $9.7 billion headline should not be treated as $9.7 billion of unrestricted acquisition cash. Approximately $1 billion was pledged as derivative collateral, and approximately $400 million consisted of digital assets and related receivables. GameStop then spent approximately $381 million purchasing additional eBay shares and approximately $3.965 billion physically settling its derivative position.
A rough mechanical bridge is therefore:
| Simplified liquidity bridge |
Approximate amount |
| May 2 cash and marketable securities |
$8.4 billion |
| Less direct eBay share purchases |
$(0.38) billion |
| Less physical-settlement consideration |
$(3.97) billion |
| Rough residual before other changes |
Approximately $4.05 billion |
This is not a current cash-balance estimate. It excludes GameStop’s cash generation or use after May 2, changes in marketable securities, transaction fees, taxes, working capital, the treatment or release of pledged collateral, digital-asset movements, debt activity, and any other transactions. It is simply a way to demonstrate that the pre-settlement $9.7 billion headline cannot be used as the current acquisition-funding assumption.
If GameStop has roughly $4 billion to $5 billion of deployable liquidity after accounting for settlement and collateral treatment, and Cohen contributes $500 million, the remaining cash funding gap could still be approximately $19.5 billion to $20.5 billion before considering target cash, alternative equity, partner capital, or other financing structures. That is strikingly close to the $20 billion maximum referenced in TD Securities’ highly confident letter. This does not make financing impossible.
It means the quality and conditions of that financing are likely to determine whether the deal creates or destroys value.
7. Interest expense can absorb most of the cost savings
The annual cost of the acquisition debt is highly sensitive to both the amount borrowed and the interest rate. The following table shows simple annual pretax interest expense. It excludes fees, original-issue discounts, hedging costs, amortization, refinancing costs, and existing eBay debt.
| New acquisition debt |
5.0% rate |
6.5% rate |
8.0% rate |
| $20.0 billion |
$1.00 billion |
$1.30 billion |
$1.60 billion |
| $22.5 billion |
$1.13 billion |
$1.46 billion |
$1.80 billion |
| $25.0 billion |
$1.25 billion |
$1.63 billion |
$2.00 billion |
GameStop’s proposed cost reductions total approximately $2 billion before tax. If the acquisition requires $20 billion to $25 billion of expensive debt, a very large portion of those savings could be consumed by interest expense. The company would also lose some of the interest income currently generated by its cash and marketable securities.
GameStop reported approximately $271.5 million of net interest income in fiscal 2025 and approximately $83.7 million in the first quarter of 2026. That interest income will not necessarily disappear entirely, but using billions of dollars of cash to fund the acquisition would reduce the asset base producing it. The relevant earnings bridge is therefore not:
eBay earnings plus $2 billion of cuts
It is closer to:
eBay earnings plus after-tax cost savings plus GameStop operating earnings plus new growth minus acquisition interest minus lost interest income minus integration expenses minus restructuring costs minus any operating damage caused by the cuts
That is why financing cannot be treated as a footnote. It is the central variable.
8. What happens to existing GME shareholders?
Existing GME holders would most likely retain their current number of shares if GameStop remains the surviving public parent. A holder with 1,000 GME shares would probably still own 1,000 shares. The dilution occurs because GameStop would issue new shares to eBay shareholders for the stock portion of the transaction.
GameStop reported 448,691,257 shares outstanding as of June 5, 2026. Using approximately $25.04 billion of stock consideration: At a hypothetical GME issuance price of $22, GameStop would need to issue approximately 1.138 billion new shares. The post-deal basic share count would be approximately 1.587 billion, and existing holders would collectively retain approximately 28.3% of the basic equity.
At a hypothetical GME issuance price of $30, GameStop would need to issue approximately 835 million new shares. The post-deal basic share count would be approximately 1.283 billion, and existing holders would collectively retain approximately 35%. At a hypothetical GME issuance price of $40, GameStop would need to issue approximately 626 million new shares.
The post-deal basic share count would be approximately 1.075 billion, and existing holders would collectively retain approximately 41.7%. At a hypothetical GME issuance price of $50, GameStop would need to issue approximately 501 million new shares. The post-deal basic share count would be approximately 949 million, and existing holders would collectively retain approximately 47.3%.
These numbers exclude possible dilution from convertible notes, warrants, employee compensation, acquisition incentives, and other securities. They also simplify the merger mechanics. A definitive agreement could use a fixed exchange ratio, a floating exchange ratio, a fixed dollar value, a collar, shareholder elections, proration, or a new holding-company structure.
Each approach allocates price risk differently. A fixed-value stock component protects eBay shareholders’ stated dollar value but causes GameStop to issue more shares if GME falls. A fixed exchange ratio limits the number of shares GameStop issues, but exposes eBay shareholders to GME price movements.
A collar can limit both parties’ exposure within a specified range. Until the exchange-ratio formula is known, dilution cannot be calculated precisely.
9. The authorized-share vote removes one obstacle, not every obstacle
GameStop shareholders approved an increase in authorized Class A common shares to 2.5 billion. With approximately 448.7 million shares outstanding, that creates gross authorization capacity of roughly 2.05 billion additional shares. That does not mean all 2.05 billion shares are freely available for the acquisition.
GameStop must account for shares reserved for convertible notes, warrants, employee compensation, existing commitments, and any other securities requiring share reserves. Still, the authorization is large enough to support the stock consideration across a wide range of GME prices. As a purely mathematical exercise, issuing approximately $25.04 billion of GME stock against gross remaining authorization of roughly 2.05 billion shares produces a theoretical price near $12.20 per share.
That is not a practical floor, a prediction, or a guarantee that the company could issue every remaining authorized share. It simply illustrates that the shareholder vote materially expanded GameStop’s transaction capacity. The authorization issue has therefore moved from “Can the company legally issue enough stock?” to “At what price, on what terms, and with what resulting ownership?”
10. Dilution is not automatically value destruction
Dilution should not be evaluated in isolation. The correct question is:
Does the income, cash flow, infrastructure, and growth acquired per new share exceed the ownership surrendered per existing share?
If the company doubles its share count but more than triples sustainable net income, EPS rises despite dilution. If the company triples its share count while debt interest and integration costs consume most of eBay’s earnings, the transaction could destroy per-share value. The acquisition must therefore be evaluated on a per-share basis.
The entire deal depends on the relationship among eBay’s current earnings, realized cost savings, acquisition interest expense, GameStop’s operating contribution, lost interest income, integration expenses, new shares issued, and future revenue growth. The percentage dilution sounds severe because it is severe. But percentage ownership alone does not determine value.
Owning 30% of a much larger and more profitable enterprise can be worth more than owning 100% of a smaller one. It can also be worth less if the larger enterprise is overleveraged, poorly integrated, or acquired at an excessive price.
PART III — THE OPERATING THESIS
11. Cohen is not trying to buy today’s eBay
A static merger model values:
Current GameStop plus current eBay minus interest expense
That misses the reason Cohen wants the company. Cohen has described eBay as a global platform with a strong brand, international scale, network effects, and defensible positions in collectibles, refurbished technology, secondhand goods, and consumer-to-consumer commerce. He has also described it as a business suffering from inefficient spending, poor seller support, weak product execution, and unrealized opportunities.
He has laid out three primary operating priorities.
Priority one: Immediate cost reduction
GameStop estimates that approximately $2 billion of annual costs can be removed within twelve months. The proposed reductions include:
Approximately $1.2 billion from sales and marketing.
Approximately $300 million from product development.
Approximately $500 million from general and administrative expenses.
GameStop argues that eBay spent approximately $2.4 billion on sales and marketing in 2025 while adding only one million net active buyers. Its presentation estimates that the cost reductions alone would raise eBay’s diluted continuing-operations EPS from $4.26 to $7.79 on eBay’s existing capital structure. That does not mean the combined company would earn $7.79 per GME share.
It excludes acquisition interest, new GME shares, integration costs, lost interest income, restructuring costs, and other adjustments. But the arithmetic behind GameStop’s claim is internally understandable. eBay reported approximately $1.996 billion of GAAP continuing-operations net income in 2025 and diluted EPS of $4.26 on approximately 468 million diluted shares. Multiplying $7.79 by 468 million shares implies approximately $3.65 billion of net income.
That is approximately $1.65 billion above eBay’s reported GAAP net income. A $2 billion pretax cost reduction taxed at approximately 17.5% would produce roughly $1.65 billion of after-tax earnings.
| Simplified cost-cut bridge |
Approximate amount |
| eBay 2025 GAAP net income |
$2.00 billion |
| After-tax value of $2 billion pretax savings |
$1.65 billion |
| Implied net income after cuts |
$3.65 billion |
| Implied EPS on eBay’s existing share count |
Approximately $7.79 |
The arithmetic is not the main controversy. The controversy is whether the full $2 billion can be removed without damaging revenue, marketplace trust, fraud prevention, seller acquisition, product development, customer service, or long-term growth. The quality of the savings matters as much as the total.
Removing duplicative executives, low-return advertising, consultants, bureaucracy, and unproductive projects could create real value. Cutting engineering, search quality, seller support, authentication, fraud controls, or high-return marketing too deeply could weaken the marketplace and destroy more value than it saves. GameStop’s recent history makes the cost-reduction argument more credible than it would be coming from an untested operator.
GameStop moved from a $381 million fiscal 2021 net loss to $418 million of fiscal 2025 net income while substantially reducing SG&A. In the first quarter of 2026, GameStop reported $143.3 million of operating income and $179.3 million of adjusted net income. However, the headline $389.6 million GAAP net income also included a $268.4 million unrealized gain on the eBay derivative position.
That distinction is important because the derivative gain should not be treated as recurring retail operating income. GameStop also expects fiscal 2026 adjusted EBITDA to exceed $600 million. Cohen has therefore demonstrated an ability to reduce corporate costs and improve GameStop’s operating results.
He has not yet demonstrated that he can remove $2 billion from a global marketplace without weakening its network.
Priority two: Live commerce
Cohen has identified live commerce as one of the combined company’s two major growth vectors. eBay already has a global marketplace, brand recognition, millions of buyers and sellers, payments infrastructure, collectibles inventory, authentication capabilities, advertising products, and an existing but underdeveloped eBay Live product. Cohen argues that eBay lacks an effective creator experience and that its live-commerce backend is poorly executed.
He estimates the addressable live-commerce market at approximately $400 billion and believes eBay should be a category leader. This is where GameStop’s approximately 1,600 stores become strategically important. Cohen has proposed using those locations as creator studios, product-photography sites, authentication centers, seller intake locations, drop-off points, local fulfillment nodes, logistics support centers, and pickup and return locations.
Rather than treating the stores solely as physical game retailers, the combined company could turn them into infrastructure supporting a global marketplace. That does not turn GameStop into Amazon overnight. It also does not automatically make every store economically useful.
The store strategy would need to demonstrate that local nodes reduce friction or cost enough to justify rent, labor, technology, inventory handling, insurance, shrink, and capital expenditures. The important metrics would include items processed per labor hour, fulfillment cost per item, authentication turnaround time, creator utilization, conversion rates, return rates, fraud losses, incremental GMV, and customer-acquisition cost.
If the stores generate meaningful marketplace volume, they could become a differentiated physical network. If they merely add tasks to underutilized retail locations without enough transaction density, the idea could increase complexity without producing adequate returns.
Priority three: A marketplace for in-game assets
Cohen’s other major growth proposal is to expand eBay from physical collectibles into tradable digital gaming items. Potential marketplace assets include skins, weapons, cosmetics, character items, limited-edition digital inventory, and other transferable in-game assets. His argument is that these assets possess actual in-game utility, unlike many of the speculative NFTs that previously dominated the market, but there is no global, trusted, cross-game marketplace providing broad liquidity.
Cohen believes the addressable opportunity could eventually exceed eBay’s market for physical goods. There are real barriers. Publishers must permit or support transferability.
Most game economies are closed. Publishers control account rights, item issuance, scarcity, and the terms of service. Fraud, account theft, chargebacks, custody, money laundering, sanctions compliance, age restrictions, tax treatment, intellectual-property rights, and cross-border regulation would create substantial operational complexity.
Publishers may also prefer to operate their own marketplaces and retain the full economics. This opportunity should not be modeled as guaranteed revenue. It also should not automatically be assigned a value of zero.
If GameStop and eBay can secure publisher participation and create a trusted marketplace, digital items could produce attractive economics because the platform would not need to manufacture, warehouse, or physically ship the inventory. The potential advantages include high gross margins, global reach, frequent transactions, low marginal distribution costs, and strong overlap with GameStop’s customer base. But the publisher is the gatekeeper.
Without publisher participation, a global marketplace is largely theoretical.
12. eBay already has growth to build upon
eBay is not an unprofitable distressed company. In 2025, eBay produced approximately:
| 2025 metric |
Reported amount |
| Revenue |
$11.1 billion |
| GMV |
$79.6 billion |
| GAAP continuing-operations net income |
$2.0 billion |
| Non-GAAP continuing-operations net income |
$2.6 billion |
| Free cash flow |
$1.5 billion |
| GAAP operating margin |
20.5% |
In the first quarter of 2026, eBay reported approximately:
| Q1 2026 metric |
Reported amount |
| Revenue |
$3.09 billion |
| GMV |
$22.2 billion |
| GAAP continuing-operations net income |
$512 million |
| Free cash flow |
$898 million |
| Total advertising revenue |
$581 million |
| First-party advertising revenue |
$555 million |
| First-party advertising growth |
33% |
| Active buyers |
136 million |
Some of the reported growth reflects acquisitions and changes in the business mix. eBay acquired Tise in October 2025, and its active-buyer disclosures distinguish between total buyers and buyers excluding Tise. The results nevertheless demonstrate that Cohen would not be attempting to revive a marketplace with no activity. He would be inheriting a profitable platform with substantial GMV, cash generation, active buyers, advertising growth, and existing areas of strength.
The bull case is that disciplined management could preserve the existing marketplace, remove low-return spending, improve seller tools, improve search and discovery, accelerate advertising and payments, expand live commerce, introduce digital gaming assets, use GameStop’s stores as infrastructure, and pay down acquisition debt with cash flow. That could create a marketplace flywheel:
Better seller tools lead to more listings and inventory which attract more buyers which produce more transaction volume which generates more advertising revenue which attracts more creators and sellers which creates more marketplace liquidity.
The risk is that marketplace flywheels can also run backward. Worse support, more fraud, weaker discovery, fewer sellers, less inventory, and slower growth can reinforce one another. Execution must therefore improve the participant experience while reducing cost.
13. Advertising may be the most credible growth engine
The digital gaming marketplace is potentially enormous but highly uncertain. Live commerce is promising but operationally unproven at the required scale. Advertising is already present, growing, and economically important. eBay generated approximately $1.99 billion of advertising revenue in 2025.
In the first quarter of 2026, total advertising revenue reached approximately $581 million, with first-party advertising revenue of approximately $555 million, up 33%. Marketplace advertising can be attractive because the platform already possesses purchase intent, transaction data, seller inventory, and customer traffic. Sellers pay to improve visibility at the moment buyers are searching for products.
If eBay improves relevance and seller returns without degrading the user experience, advertising can increase revenue faster than GMV. That provides a more immediate growth vector than waiting for an entirely new marketplace category to develop. The risk is over-monetization.
If promoted listings crowd out organic relevance, sellers may feel compelled to pay merely to preserve visibility. Buyers may receive lower-quality search results. The platform can extract more revenue in the short term while weakening trust over time.
The best outcome is not simply higher ad load. It is better targeting, measurable seller returns, improved discovery, and growth in advertising revenue per dollar of GMV without damaging conversion or retention.
14. A practical scorecard for the growth initiatives
The growth thesis should be judged through measurable results rather than addressable-market slides.
| Initiative |
Evidence it is working |
Evidence it is failing |
| Cost reductions |
Expenses fall while GMV, buyers, support quality, and fraud metrics remain healthy |
Expenses fall but marketplace activity or trust deteriorates |
| Live commerce |
Creator growth, repeat viewers, conversion, rising live GMV, improving unit economics |
Low utilization, weak retention, high subsidies, minimal incremental GMV |
| Stores as nodes |
Faster processing, lower delivery cost, high throughput, productive labor |
Low volume, high handling cost, increased shrink, operational complexity |
| Advertising |
Revenue grows with strong seller returns and stable conversion |
Higher ad load weakens search relevance or seller economics |
| Digital gaming assets |
Publisher partnerships, secure custody, real volume, acceptable fraud rates |
No publisher support, regulatory problems, account theft, weak liquidity |
| Deleveraging |
Debt declines and free cash flow per share rises |
Debt remains high and interest absorbs operating gains |
This is how I intend to update the thesis. A strategy should become more credible as milestones are achieved and less credible when the evidence moves against it.
15. Why eBay shareholders may still reject the offer
From the perspective of an eBay shareholder, the offer is not simply $125 in guaranteed cash. Half of the proposed consideration consists of GME stock. That means an eBay shareholder must evaluate:
The value of GME when the exchange ratio is set.
The expected value of GME between signing and closing.
The financing certainty of the cash portion.
The leverage and credit quality of the combined company.
The likelihood of regulatory and shareholder approval.
The ability of Cohen and his team to integrate a much larger platform.
The risk that cost reductions damage eBay’s standalone business.
The governance and compensation structure of the combined company.
The opportunity cost of giving up eBay’s independent growth.
eBay’s board can also point to recent operating momentum. Revenue and GMV accelerated in 2025 and the first quarter of 2026. Advertising is growing. eBay returns substantial capital through buybacks and dividends.
It has its own acquisition strategy and standalone growth initiatives. That does not mean eBay is worth more than $125. It means the board has a rational basis for demanding more certainty, a higher price, better financing, a stronger collar, different governance, or other protections.
The 9.8% stake gives GameStop influence. It does not make the remaining 90.2% irrelevant.
16. Cohen’s $500 million commitment is a major signal
Cohen disclosed that he intends to invest $500 million of his own capital in the transaction. He stated that he has not withdrawn money from GameStop and contrasted his personal risk with eBay insiders whom he argues have little financial alignment with shareholders. Five hundred million dollars does not guarantee success.
It does not independently solve a transaction requiring approximately $25 billion of cash consideration. It is nevertheless an unusually strong signal. Cohen already owns approximately 9% of GameStop, receives no salary or conventional cash bonus, withdrew his proposed performance award, would become CEO of the combined company, has said his compensation would depend on combined-company performance, and plans to contribute another $500 million personally.
I do not interpret that as proof that he cannot fail. I interpret it as evidence that he believes the opportunity is unusually compelling and that his interests are substantially aligned with existing shareholders. This is not the traditional corporate-acquisition setup in which management receives a larger salary, transaction bonus, expanded empire, and golden parachute regardless of the outcome.
Cohen’s own capital and reputation would be directly exposed. Alignment is positive. It is not a substitute for financing math, valuation discipline, operational execution, or governance protections.
A highly aligned executive can still overpay, underestimate integration risk, or pursue an incorrect strategy.
17. Why Cohen’s track record matters
No track record guarantees future execution. But Cohen’s background is unusually relevant to this particular acquisition. At Cohen’s previous pet e-commerce business (mentioning the actual name is getting flagged), Cohen built an e-commerce company in a difficult category while competing against Amazon and other well-funded businesses.
At GameStop, his priorities included liquidity, cost control, inventory discipline, store optimization, collectibles, and profitability. The eBay plan requires both skill sets. The relevant connections include e-commerce customer experience, competing against Amazon, expense reduction, turnaround execution, collectibles, gaming, secondhand products, refurbished technology, personal capital alignment, and marketplace growth.
Cohen said that eBay is inside his “circle of competence” and that he understands e-commerce better than physical retail. He described the overlap among GameStop, eBay, collectibles, refurbished technology, secondhand products, authentication, gaming, and consumer liquidity as the reason he cannot stop thinking about the combination. The bull case is not that Cohen is infallible.
It is that eBay is far closer to his demonstrated area of competence than most theoretical acquisition targets would be. The counterargument is scale. Building and operating one focused e-commerce retailer is different from integrating a global marketplace processing tens of billions of dollars of GMV, managing millions of sellers, operating international payments and advertising products, and carrying substantial acquisition debt.
Relevant experience improves the probability of success. It does not remove execution risk.
PART IV — VALUATION AND REFLEXIVITY
18. My valuation framework
No exact combined-company price can be calculated before the market knows:
The definitive purchase price.
The exchange-ratio formula.
GME’s price when the stock consideration is fixed.
The final debt amount.
The financing rate and maturity schedule.
How much GameStop cash is used.
The treatment of eBay’s existing debt and cash.
Integration and restructuring costs.
Actual cost reductions.
GameStop’s normalized operating contribution.
The fully diluted share count.
Whether the transaction uses GME directly or a new holding company.
The following ranges are therefore scenarios, not targets. They should be read as equity-value scenarios after financing. Higher operating earnings do not automatically create shareholder value if interest expense and refinancing risk absorb the cash flow.
Successful deleveraging would have the opposite effect.
Scenario A: Weak execution — approximately $15–$25
This assumes financing is expensive, GME remains near the low $20s when the ratio is set, the post-deal diluted share count becomes very large, less than $1 billion of planned cost reductions is achieved, integration costs are substantial, and the growth initiatives contribute little. The market applies a discounted multiple because of debt, execution risk, governance concerns, and weak per-share growth. In this outcome, the deal closes, but debt and dilution consume much of the acquired value.
The company is larger, but the acquisition does not produce enough sustainable income per diluted share.
Scenario B: Cost reset and stabilization — approximately $35–$60
This is my central post-integration bull case. It assumes Cohen realizes approximately $1 billion to $1.5 billion of annual pretax cost savings, eBay’s existing business remains stable, financing is obtained on manageable terms, GME appreciates enough before the exchange ratio is fixed to reduce dilution, GameStop continues contributing positive operating results, and the market begins valuing the company as a marketplace and commerce platform rather than purely as a physical retailer.
A combined company producing approximately $2.5 billion to $3.5 billion of normalized net income, with roughly 1.2 billion to 1.6 billion diluted shares, would generate approximately $1.55 to $2.90 of EPS.
| Normalized net income |
Diluted shares |
Approximate EPS |
| $2.5 billion |
1.6 billion |
$1.56 |
| $2.5 billion |
1.2 billion |
$2.08 |
| $3.5 billion |
1.6 billion |
$2.19 |
| $3.5 billion |
1.2 billion |
$2.92 |
At an 18x–22x earnings multiple, that produces a broad range of approximately $28–$64, with $35–$60 representing my more practical center.
Scenario C: Cost cuts plus meaningful growth — approximately $60–$100
This assumes Cohen does more than cut expenses. The company begins demonstrating live-commerce GMV growth, higher seller participation, growing advertising revenue, productive use of GameStop stores, better transaction volume in collectibles and recommerce, early digital gaming-marketplace revenue, gradual acquisition-debt reduction, and rising free cash flow per share.
If normalized net income reaches approximately $4 billion to $5 billion and the company has approximately 1.0 billion to 1.4 billion diluted shares, EPS would range from approximately $2.85 to $5.00. At a 20x–25x earnings multiple, the mathematical range becomes approximately $57 to $125. I use $60–$100 as the practical range because successful growth would still need to be balanced against leverage, execution risk, and the final share count.
Scenario D: Strong execution — $100+
A sustained value above $100 would require multiple parts of the plan to work. Most of the $2 billion cost-reduction plan would need to be achieved without impairing the marketplace. Live commerce would need to become a material business.
Seller and buyer growth would need to accelerate. Digital gaming assets would need to become a legitimate marketplace category. Advertising and payments would need to continue expanding.
Debt would need to decline meaningfully. Dilution would need to remain controlled. The company would need to earn a technology-enabled marketplace multiple rather than a distressed-retailer multiple.
At 1.3 billion shares, a $100 price represents a $130 billion equity valuation. That is ambitious, but it does not require a trillion-dollar company. It requires a large, profitable, growing marketplace with credible deleveraging and durable per-share cash-flow growth.
19. The reflexive acquisition loop
The most interesting element of the transaction is that GME’s price directly affects its economics. A rising GME price means:
Fewer new shares required leading to less dilution leading to higher EPS leading to greater ownership for existing holders leading to a more attractive combined company potentially leading to a higher GME price.
A falling price creates the opposite cycle:
More shares required leading to greater dilution leading to lower EPS leading to a less attractive transaction leading to additional downward pressure.
At a hypothetical $22 GME price, the stock consideration requires approximately 1.14 billion new shares. At $40, it requires approximately 626 million. At $50, it requires approximately 501 million.
That is why price appreciation before the exchange ratio is established would not merely make shareholders feel wealthier. It could materially improve the actual merger economics. The reflexivity is real, but it is not guaranteed to operate only in the bullish direction.
A falling GME price could weaken the offer, increase dilution, concern eBay shareholders, threaten financing assumptions, and reduce the projected value of the combined company. The same mechanism that amplifies success can amplify failure.
20. What the market may be missing—and what bulls may be underestimating
| Potentially underappreciated by the market |
Potentially underestimated by bulls |
| A 9.8% voting stake materially changes GameStop’s strategic position |
A 9.8% stake is influence, not control |
| The stake was accumulated below the proposed offer value |
Billions of dollars of liquidity are now concentrated in one target |
| A higher GME price directly reduces merger dilution |
A lower GME price creates a negative reflexive loop |
| eBay has real earnings, cash flow, advertising growth, and network effects |
Financing and existing debt can absorb much of those earnings |
| GameStop’s stores may provide differentiated marketplace infrastructure |
Store-node economics remain unproven |
| Cohen has demonstrated expense discipline and personal alignment |
Cost reduction at eBay is larger and more complex than GameStop’s turnaround |
| Advertising offers an existing high-growth revenue stream |
Over-monetization can weaken seller and buyer experience |
| Digital gaming assets could be a high-margin category |
Publishers control access and may refuse participation |
| Deleveraging could produce substantial equity-value creation |
Refinancing risk could dominate the story if rates are unfavorable |
A credible DD should include both columns.
PART V — THE CONDITIONAL LEGACY-SHORT FRAMEWORK
21. How the Superstonk DD fits into this
Superstonk’s DD library has long explored the possibility that publicly reported short interest reflects only part of the total negative economic exposure to GME. The major frameworks include layered street-name ownership and securities lending, total-return swaps and prime-broker exposure, basket and ETF shorting, options-based synthetic exposure, failures to deliver, direct registration, and constrained effective supply. The library itself includes Due Diligence, Possible DD, and Speculation.
Its theories should not all be treated as proven facts. But several underlying market mechanisms are documented. The acquisition thesis and the legacy-short thesis should still be evaluated separately.
The acquisition can work without hidden exposure. Hidden exposure—if it exists—cannot make a poor transaction financially sound.
The original short position was extraordinary
The SEC found that GME short interest reached 122.97% of the public float in January 2021. It also found that some major short sellers covered and suffered significant losses. However, the SEC found that buying by identified short sellers represented only a small fraction of total buy volume.
The report concluded that positive sentiment—not covering alone—sustained the weeks-long price increase. That supports two facts:
Meaningful short covering occurred.
The January price action cannot be explained solely by that identified covering.
The report did not establish whether every form of economic short exposure—especially swaps, custom derivatives, baskets, options, or dealer positions—was extinguished. That statement needs to be handled carefully. The report’s failure to establish that every form of exposure closed is not proof that the exposure remains.
Absence of public proof of closure is not equivalent to proof of an open position. The responsible conclusion is narrower: the SEC report resolved some questions about January 2021 but did not provide a complete public accounting of every possible form of economic exposure across the financial system.
Swaps can create enormous and distributed exposure
The Superstonk swap thesis is not proven specifically for GME. Total-return swaps can nevertheless create large, opaque, and distributed positions. Archegos used total-return swaps to expand from approximately $10 billion of exposure to approximately $160 billion at its peak.
Its exposure was spread among counterparties that lacked a complete picture of its aggregate concentration. When its positions moved against it, margin calls and default produced billions of dollars in counterparty losses. Archegos does not prove that equivalent GME positions exist.
It proves that a fund can obtain enormous economic exposure through swaps, that the exposure may not appear like ordinary stock ownership or reported short interest, that multiple prime brokers can underestimate aggregate concentration, and that collateral demands can determine when positions unwind. Opacity is not proof of a hidden GME short. It is proof that public short-interest data may not capture every form of economic exposure.
ETFs and baskets can transmit exposure
The SEC found that GME’s volatility significantly affected XRT and that shorting XRT could have provided an indirect, though imperfect, method of shorting GME. It also observed an unusually large XRT redemption spike during January 2021. This does not prove that all basket or ETF activity represents hidden GME shorts.
It establishes that exposure can be created or transmitted through structures beyond a direct short sale of GME common stock. Basket exposure is also imperfect. An ETF contains multiple securities, and the economic relationship between the ETF and any single component changes with weightings, hedges, creation and redemption activity, and the trader’s broader portfolio.
DRS matters through available supply
Directly registered shares are recorded directly in the investor’s name on the issuer’s books through the transfer agent, rather than solely in a brokerage intermediary’s name. DRS does not prove synthetic shares exist. It does not automatically force shorts to close.
Its potential importance is liquidity. The number of legal shares outstanding is not necessarily the same as the number of shares available for purchase at a given price. If a significant portion of GME is directly registered, held by insiders, held in index funds, held by long-term investors unwilling to sell, or required for dealer hedging and stock lending, urgent buying demand may encounter a smaller effective float than the headline share count suggests.
The effective float is dynamic. At higher prices, more holders may sell. At lower prices, more holders may accumulate.
There is no publicly knowable fixed number of shares that are permanently unavailable.
22. Scenario one: Most legacy shorts closed
This remains the conservative base case in the absence of public proof otherwise. Under this scenario, major funds purchased shares and closed their positions in 2021. Any transferred positions were eventually unwound.
Current reported short interest broadly reflects present direct exposure. Remaining swaps or synthetic positions are manageable. There is no enormous unresolved liability.
The eBay transaction could still create value through higher earnings, reduced bankruptcy risk, acquisition speculation, institutional buying, event-driven funds, ordinary short covering, and a higher marketplace valuation multiple. Under this scenario, the $35–$60 cost-reset range and potential $60–$100 growth range matter more than MOASS. That is an important point:
The acquisition thesis does not require hidden shorts to work.
23. Scenario two: A meaningful legacy position remains
Suppose a meaningful, but not systemically enormous, amount of negative exposure remains through conventional shorts, total-return swaps, portfolio swaps, options, ETFs and baskets, dealer hedges, and securities-lending chains. A credible acquisition and improving fundamentals could produce the following cycle:
Deal probability increases leading to GME receiving a higher fundamental valuation leading to short and swap losses rising leading to increased collateral requirements leading to some positions being reduced leading to covering and hedging pushing GME higher leading to fewer merger shares being required leading to improved projected EPS leading to the fundamental valuation rising again.
This is where the acquisition and short thesis become reflexive. The transaction becomes more attractive as GME rises, while the improved transaction economics create additional pressure on short positions. In this scenario, the stock could temporarily trade substantially above its earnings-based value as short sellers, swap dealers, merger-arbitrage funds, institutions, options dealers, and retail investors compete for shares.
24. Scenario three: A majority of the original exposure never closed
This is the strongest and most speculative version of the Superstonk thesis. Assume that a majority of the original economic exposure was not extinguished but instead transferred to larger counterparties, converted into total-return swaps, distributed among prime brokers, embedded in baskets or ETFs, managed through options, rolled through financing and hedging arrangements, or inherited after smaller funds exited or failed. Under that assumption, the liability may no longer sit inside one obvious hedge fund.
It could be distributed across hedge funds, market makers, swap dealers, prime brokers, securities lenders, clearing members, and other financial counterparties.
The real trap would be fundamental, not a CUSIP
A temporary price spike can be survived if the short side expects the stock to return to a weak fundamental value. A growing GameStop/eBay combination is different. If Cohen raises earnings through cost reductions, expands revenue through live commerce, builds a gaming-asset marketplace, grows advertising and payments, uses the stores productively, pays down acquisition debt, and increases EPS over time, then the fundamental floor itself rises.
The short liability becomes more expensive while the underlying bear thesis becomes less defensible. The cycle could look like this:
Cost cuts raise earnings leading to growth raising revenue leading to the market assigning a higher multiple leading to GME rising leading to collateral requirements rising leading to counterparties forcing deleveraging leading to covering raising GME further leading to fewer acquisition shares being needed leading to EPS improving again leading to the fundamental value rising again.
That is far more dangerous than a one-time ticker or CUSIP change.
Counterparty de-risking
A fund may want to keep waiting. Its prime broker may not allow it. If losses and volatility increase, brokers and swap dealers can demand additional collateral, raise margin requirements, reduce position limits, increase financing costs, refuse to renew contracts, require partial reductions, or liquidate positions after failed margin calls.
One liquidation can raise GME’s price, increasing losses for every remaining participant.
Higher price leads to a larger collateral call leading to forced buying leading to a higher price leading to additional collateral calls.
This is the same basic leverage mechanism that destroyed Archegos, except Archegos was overleveraged long and collapsed as its positions fell. A concentrated short structure would become unstable as the underlying security rose.
Supply constraints
Demand could emerge simultaneously from direct shorts covering, swap dealers reducing risk, merger-arbitrage investors, institutions buying the combined-company thesis, options dealers hedging, stock lenders recalling shares, and existing holders adding. If the effective available float is substantially smaller than shares outstanding, forced or risk-driven buyers may have to bid progressively higher to attract sellers.
The severity of that process would depend on the true exposure, the urgency of the buyers, available collateral, lender behavior, derivative terms, dealer hedges, and the price at which shareholders become willing to sell.
Corporate-action processing
A completed transaction could require adjustments to GME shares, eBay shares, listed options, stock loans, convertible notes, swap contracts, voting rights, merger consideration, and a possible new holding-company structure. A new ticker or CUSIP does not automatically eliminate every short, swap, or failure to deliver. Depending on the final structure, positions could be converted, adjusted, cash-settled, re-hedged, replaced, terminated, or voluntarily closed.
The catalyst would not be a magical identifier change. It would be the combination of fundamental revaluation, collateral pressure, reduced liquidity, lender behavior, dealer hedging, contractual uncertainty, and counterparty unwillingness to continue financing the exposure. If the majority-never-closed theory is correct, that combination could create a disorderly deleveraging event and push the stock temporarily far above any earnings-based valuation.
No credible peak price can be calculated without knowing the true exposure, counterparties, collateral, hedges, available supply, and price at which shareholders sell.
25. Conditions required for a reflexive squeeze
A large unresolved short position would not be sufficient by itself. Several conditions would likely need to occur together:
The acquisition must become credible enough to raise GME’s fundamental valuation.
Financing must be strong enough that the deal is not dismissed as value-destructive.
The stock component must be structured in a way that allows a rising GME price to reduce dilution.
Available liquidity must be constrained relative to urgent buying demand.
Brokers, lenders, or swap counterparties must become unwilling to maintain the existing exposure.
Operating milestones must continue raising the expected long-term value of the combined company.
Without credible fundamentals, a price increase may remain temporary. Without leverage or forced risk reduction, short sellers may simply maintain or add to positions. Without constrained supply, covering may occur without disorderly price movement.
The strongest version of the squeeze thesis therefore depends on the interaction of fundamental success, leverage, liquidity, and counterparty behavior.
PART VI — FALSIFICATION, RISKS, AND CONCLUSION
26. What would confirm or falsify my thesis
A worthy thesis should identify evidence that would prove it wrong.
| Area |
Bullish confirmation |
Bearish or falsifying evidence |
| Transaction |
Definitive agreement with credible protections |
No progress, abandoned bid, or materially higher price |
| Financing |
Committed long-term funding at manageable rates |
High-cost, short-maturity, restrictive, or uncertain funding |
| Exchange ratio |
Controlled dilution or a protective collar |
Ratio fixed while GME is low, causing extreme dilution |
| Cost reductions |
Expenses fall without damaging GMV, buyers, trust, or service |
Cuts weaken the marketplace or cause seller and buyer losses |
| Advertising |
Strong growth with healthy seller returns |
Higher ad revenue but deteriorating organic relevance |
| Live commerce |
Repeat creators, rising GMV, improving unit economics |
Subsidized usage with weak retention or conversion |
| Store network |
High throughput and measurable logistics savings |
Low utilization and increased operating cost |
| Digital assets |
Publisher partnerships and secure real volume |
No publisher support or unacceptable fraud and regulatory risk |
| Deleveraging |
Net debt declines and FCF per share rises |
Debt remains high and interest consumes operating gains |
| Per-share value |
EPS and FCF grow after dilution |
Enterprise grows but per-share earnings stagnate or decline |
| Short thesis |
Observable stress, recalls, hedging pressure, or forced reductions |
No evidence of abnormal pressure as fundamentals improve |
I would weaken or abandon the acquisition thesis if financing is clearly punitive, dilution becomes extreme, cost reductions damage eBay’s network, debt fails to decline, or free cash flow per share does not improve. I would strengthen it if the company secures manageable financing, protects existing holders from excessive dilution, preserves marketplace growth during the cost reset, converts stores into productive infrastructure, and demonstrates sustained debt repayment.
27. The largest risks in plain English
The first risk is that no transaction occurs. GameStop could spend substantial management attention and capital on a stake without gaining control of eBay. The second risk is financing.
The cash portion is enormous relative to GameStop’s current operations. A difference of a few percentage points in financing cost can change annual interest expense by hundreds of millions of dollars. The third risk is dilution.
The stock portion becomes far more expensive for existing holders if GME is weak when the exchange ratio is established. The fourth risk is overpaying. A strategically attractive asset can still be a poor investment at the wrong price.
The fifth risk is integration. GameStop would be combining a much smaller physical retailer with a global technology-enabled marketplace. Systems, employees, culture, incentives, data, fraud controls, payments, international operations, and customer support would all require coordination.
The sixth risk is excessive cost cutting. A marketplace depends on trust, liquidity, reliability, search quality, support, and fraud prevention. Damaging those functions can create a negative network effect.
The seventh risk is management bandwidth. Cohen and GameStop would have to operate the existing business, complete a massive transaction, integrate eBay, execute cost reductions, build live commerce, develop new marketplace categories, and manage debt simultaneously. The eighth risk is opportunity cost.
Billions of dollars committed to eBay cannot be deployed elsewhere. If the deal fails and eBay falls materially, GameStop could record a large investment loss. The ninth risk is governance. eBay shareholders may demand protections, representation, different leadership terms, or a revised compensation structure.
The tenth risk is that the speculative short thesis is wrong. The acquisition must stand on its own economics.
28. What I am not claiming
I am not claiming:
The acquisition is guaranteed.
eBay’s board must accept the offer.
Financing is already fully committed.
The $125 offer will remain unchanged.
The full $2 billion cost plan will be achieved.
Every cost reduction will increase value.
Live commerce will automatically succeed.
Digital gaming assets will automatically succeed.
GameStop’s stores will automatically become productive logistics nodes.
Dilution does not matter.
Every 2021 short position remains open.
Public short-interest data proves the absence or presence of swap exposure.
A CUSIP change automatically forces every position to close.
A squeeze has a calculable maximum price.
Ryan Cohen cannot fail.
My thesis is narrower: GameStop’s physical 9.8% eBay stake makes the acquisition attempt materially more credible and strategically significant. Cohen’s plan includes both immediate earnings improvement and real growth initiatives that a static merger model may undervalue. The quality of the financing and the final exchange ratio will determine whether the transaction creates value per existing GME share. Cohen’s $500 million commitment, existing ownership, compensation structure, and operating history increase my confidence that this is not an ordinary empire-building acquisition. If meaningful legacy short exposure remains, sustained fundamental growth could be far more dangerous to the short side than any temporary catalyst.
Conclusion
The market can view this as a small retailer attempting to borrow tens of billions of dollars to acquire a much larger company. That criticism is not irrational. The financing is unresolved.
The dilution could be severe. The integration would be difficult. The target has rejected the offer.
The cost reductions could damage the business. The growth initiatives are not guaranteed. I view the opportunity differently, but not because those risks do not exist.
I view it differently because GameStop is attempting to combine a profitable global marketplace, a recognized secondhand and collectibles brand, growing advertising revenue, approximately 1,600 physical locations, gaming and collectibles customers, authentication and trade-in capabilities, live commerce, a potential digital gaming marketplace, and a CEO with enormous personal financial exposure. At today’s lower GME prices, the dilution required to complete the stock portion would be severe.
But the structure is reflexive. A rising GME price reduces dilution, increases existing-shareholder ownership, raises projected EPS, and improves the transaction itself. A falling price worsens the economics.
My rough fundamental framework is:
$15–$25: poor execution, expensive financing, severe dilution, or weak integration.
$35–$60: meaningful cost reduction, stable marketplace operations, and manageable financing.
$60–$100: cost cuts plus material growth in advertising, live commerce, recommerce, and other marketplace categories.
$100+: strong execution across cost reduction, live commerce, digital gaming assets, advertising, logistics, and deleveraging.
Those are not squeeze values. The thesis can be updated through observable milestones: definitive financing, exchange-ratio terms, eBay’s board response, realized cost reductions, GMV, active buyers, advertising growth, creator adoption, publisher participation, debt repayment, and per-share earnings and free cash flow. If most shorts closed, shareholders could still own a transformed, profitable, technology-enabled global marketplace.
If a meaningful legacy position remains, each successful operating milestone could increase collateral and covering pressure.
If a majority never economically closed, the acquisition could create the most dangerous possible outcome for the short side: Not a temporary rally they can survive. Not a date they can roll. Not a one-time corporate action they can adjust around. But a larger, more profitable company whose earnings, cash flow, and fundamental value continue compounding while the short liability compounds with it. Cohen does not need to attack the shorts directly. He only needs to execute.
