People close to the situation, who asked not to be named, say CEO Ryan Cohen is now weighing a partnership instead.
One idea being floated is a partnership that would give eBay access to GameStop's roughly 1,600 U.S. stores.
That could help both companies gain ground in high-margin areas like trading cards and collectibles, where each sale brings in more profit.
GameStop is already one of eBay's largest shareholders, and it would want board seats under a partnership. The company hasn't settled on a final path, and Cohen might choose a different route. A final choice remains pending, and Cohen could select an alternative.
On Monday, eBay shares fell almost 4% to close at $107.71. That put eBay's market value at $47.9 billion, or about $52 billion including debt.
In a typical takeover, the target's stock drifts toward the offer price as investors bet the deal will close. The gap between eBay's $107.71 close and the $125 offer shows how much doubt surrounds this one.
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GameStop first bought 5% of eBay, then raised its stake to 9.75% as of July 15. That makes it eBay's second-largest shareholder, behind only Vanguard Group funds.
The company, based in Grapevine, Texas, has $8.4 billion in cash. Its own market value has fallen to $8.6 billion, meaning the buyer is worth barely more than the cash it holds.
The target it is chasing is valued at about $52 billion including debt.
The video-game retailer has spent years shrinking its physical footprint as more game sales moved online. In 2021, it became a center of the meme-stock frenzy, with shares soaring on retail investor enthusiasm.
Investor Michael Burry/), known for betting against mortgages before the 2008 crisis, was bullish on GameStop around that time. But after the eBay offer, he said he sold all his holdings because he worried the deal would load the company with heavy debt.
eBay has struggled to keep up with shifting shopper habits, but the platform remains enormous. People buy about $80 billion worth of goods on it each year, and it has 136 million active buyers.
Each side has something the other wants. GameStop brings physical stores and a loyal customer base. eBay brings a massive online marketplace and logistics network.
A partnership would not carry the $56 billion price tag of a full takeover. GameStop would keep its cash, eBay would keep its independence, and both would get a shot at the growing collectibles and trading-card market.
The proposed deal has been controversial from the start. GameStop's stock is still volatile from its meme-stock days, and many investors questioned why a video-game retailer would take on debt to buy an e-commerce giant. The company's cash pile is large, but the bid would have required significant borrowing, which worried shareholders like Burry.
The bottom line: If GameStop pulls the bid, eBay investors lose the promise of $125 per share. GameStop investors would avoid the debt risk that worried Burry, but they would also give up the potential upside of a full acquisition. For now, the next few weeks will determine which path Cohen chooses.
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