Co-Founder, Chewy
GameStop CEO Ryan Cohen Talks Plan to buy eBay | Bloomberg Talks
GameStop CEO Ryan Cohen says he would go directly to shareholders with his bid to buy eBay while speaking with Bloomberg News' Ed Ludlow on Bloomberg Tech. Following his comments, eBay's stocks fell to a session low. Cohen also spoke about GameStop's financial turnaround under his leadership.
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About Ryan Cohen
Ryan Cohen, CEO of GameStop, has been publicly pursuing an unsolicited $56 billion bid to acquire eBay, which eBay rejected as "neither credible nor attractive." In multiple interviews, Cohen stated that he is committed to the acquisition "one way or another" and said he is working with bankers and advisors. He argued that the media has failed to explain why the deal makes sense, citing his track record with Chewy and GameStop, his plan to invest $500 million of his own money, and his identification of high-margin growth opportunities in live commerce and in-game digital marketplaces. Cohen said he would go directly to eBay shareholders, stating that the "fate of the business is going to be decided by the owners of the business." Cohen has also discussed GameStop's financial turnaround under his leadership, noting that the company was losing hundreds of millions of dollars per quarter when he joined the board and is now profitable, with SG&A reduced by $800 million. He has emphasized that he has not taken a salary or compensation from GameStop and that his investment comes from buying shares on the open market. Cohen has criticized what he described as an "entrenched" management team at eBay, claiming the CEO makes nearly $30 million annually without buying stock, and has committed to cutting $2 billion in costs at eBay within the first year if the acquisition proceeds.
Transcript (51 segments)
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Narrator0:02
Bloomberg Audio Studios, podcasts, radio, news.
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Ed0:08
One of the biggest potential deals in technology is GameStop's attempt to buy eBay. In May, the video game retailer and its CEO Ryan Cohen launched an unsolicited $56 billion bid for the e-commerce platform. eBay rejected the offer, calling it neither credible nor attractive. Since then, Cohen has scrapped a controversial multi-billion dollar pay package and GameStop shareholders have approved increasing the company's authorized share count, giving it more flexibility to pursue strategic transactions. So, where does the deal stand now? Ryan Cohen joins us on Bloomberg television and radio. Ryan, thank you for your time and good morning. Welcome to Bloomberg Tech. On the long list of things that have happened since May. Our audience just has a very simple question for you, which is what's changed, what's developed in that period of time.
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Ryan Cohen1:03
There has been a complete failure by the media to explain why this transaction makes sense. And so, number one, my track record, Chewy and GameStop, it speaks for themselves. My alignment with shareholders. I'm putting $500 million of my own money into this transaction. The high margin growth opportunities for this business within live commerce, which the company has not been doing well, and using GameStop stores as nodes for both the marketplace and live commerce is huge because the business today in live commerce is tiny. Then building out a digital marketplace for in-game items. Those are just some of the high growth opportunities within the business. And then there is the cost takeout opportunity. I've committed to taking out $2 billion within the first year. And that's just the beginning. So this whole narrative that the business is going to be too leveraged is a fantasy invented by the media and it's just simply not true.
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Ed2:16
Let's go there. You lined up some banking support, right? And I think that one of the concerns that Moody's put out there as an example was the credit rating and the creditworthiness of the combined entity. So again another question from the audience is explain the banking support that you've secured since May but also that concern that the debt component of it, what the credit negative outlook would be for a combined entity based on the plan that you've just outlined.
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Ryan Cohen2:55
We have a highly confident letter from our bankers. We have a lot of parties that are interested in this transaction and the most important thing ultimately if we can't get the debt then it means that eBay can't get the debt and eBay can get the debt. So this entire narrative is simply not true.
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Ed3:20
I didn't explain that question very well, Ryan, if I'm self-reflective honest about it. So I'm just going to go back to it. Your financing letter is from TD, right? And it was widely reported to depend on the combined company maintaining investment grade credit rating. And then Moody's came out and said that this deal would be credit negative for the combined company. Have you taken steps to address that?
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Ryan Cohen3:46
Nobody has reached out to us including the credit agencies but the pro-forma company is going to be investment grade.
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Ed3:57
We talked at the beginning of the conversation about shareholders improving, increasing, sorry, the company's authorized share count. Does that allow you to do something new that you couldn't have otherwise done in the context of the eBay deal?
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Ryan Cohen4:17
Yeah, I mean we, yes, it does.
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Ed4:21
And what would that be?
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Ryan Cohen4:25
Buy the business, buy eBay.
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Ed4:29
I posted on X that you were coming on the show and you know in the context of what you've done with financial mechanics of late, you know, the question that existing GameStop shareholders sent to me over and over again is, you know, you're asking them to accept pretty significant dilution and they're basically asking like what's the payoff for them in accepting that dilution?
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Ryan Cohen4:55
There's different forms of dilution. Most dilution is dilutive to shareholders. When you're buying a business and I've committed to pulling $2 billion of costs out, so if you do the math, I'm buying a business for 56 billion. And the business is forecasted to make over 3.5 billion. That's the consensus for 2026 plus what I would be pulling out in cost. So you're at over 5.5 billion of EBITDA and then the ability to take this platform and build a much much larger business. The upside is huge. So I wouldn't go and buy a business if I didn't think I can take it from 56 billion and turn it into multiples larger. So it's accretive to shareholders but most of the time when companies are issuing shares it's dilutive and earnings per share goes down. In this case it's a different story but most of the time you have management teams, a good example is this company that collects tons of risk-free compensation and they're not aligned with shareholders. In this case that's not the case.
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Ed6:17
You have the letter from TD. You said earlier you were going to put $500 million of your own money into this transaction. Outside of that, is there any other financing support, any other parties that since mid-May you've pulled into it?
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Ryan Cohen6:32
We've had a lot of parties come to us. And there's been a lot of interest from the capital markets.
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Ed6:42
We're live on Bloomberg television and Bloomberg radio with Ryan Cohen, the CEO of GameStop. We're talking about Ryan and GameStop's bid to buy eBay. Really simple question. Has anyone from eBay, the management team or the board reached back out to you or responded to you in this interim period?
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Ryan Cohen7:03
No, I hope they do, but they're entrenched and they're hiding behind their advisers. If I go to teddy.com on any browser, I'm diverted back to gamestop.com.
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Ed7:18
Why? I'm focused on GameStop? The root of the question is, let's say that you proceed with this. There's a very wide range of opinion, speculation basically. Why does Ryan Cohen want to buy eBay? At one extreme is the idea that you just want to be the CEO of eBay rather than GameStop. At the other end is the idea that you have a bigger plan, a master plan. You kind of talked about it a little bit earlier, but what's the reality here? What is the bigger picture for a combined entity or referencing teddy.com? Some there's some history there, but a sort of conglomerate, a holding company.
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Ryan Cohen8:03
eBay is a platform that I can build into something much more profitable and much larger. The ability to take GameStop stores and our experience in gaming and refurbished tech and collectibles combined with eBay and be a leader in live commerce, build out an in-game digital marketplace, use the stores for same day authentication, and ultimately pull out significant cost. And none of these things come at the expense of growth. It's actually the opposite. The more efficient you get, the easier it is to grow. It makes too much sense. So that's why I want the business. That's why I want to buy it. It's not that complicated. There is such overlap between the businesses. And my experience is in e-commerce.
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Ed9:04
Are you prepared to improve the offer, Ryan?
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Ryan Cohen9:10
I'm not going to negotiate against myself.
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Ed9:13
But that might be what it takes.
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Ryan Cohen9:15
We'll see what happens. Ed,
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Ed9:17
You've talked about this a little bit recently. A lot of people point out to me, you've done a number of interviews in quick succession, right? What happens if eBay just keeps saying no?
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Ryan Cohen9:31
Ultimately, it's going to be the owners of the business that are going to decide who is more competent, who's more aligned with shareholders, and who's more capable of building a much much larger business. So, the management team can only hide for so long. And I would love for this to be a collaborative process and a consensual process. That's my preference. That's number one. But if that doesn't happen, then it's going to be shareholders' decision because they're the owners of the business.
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Ed10:09
Right. I do want to talk a lot more about the GameStop business, a lot more about eBay, and we're going to take a break and come back and do that. Talk about what's really happening. I have a final question from the audience that I promised I would put to you and it's from GameStop shareholders. A lot of GameStop shareholders have asked about the warrants that expire in October. You know, another recent or relatively recent financial transaction from the company. What should they expect happens with those warrants between now and October of this year?
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Ryan Cohen10:41
I don't have a crystal ball. I can't answer that question.
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Ed10:48
Okay. Their expectation is that when they expire, I think the date's October 26th, is that's the outcome.
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Ryan Cohen10:54
Ed, people that have invested alongside me when it comes to Chewy or GameStop and me committing $500 million into eBay, they've done very, very well. So, I don't have a crystal ball. I can't predict the future, nor can anyone that I've ever met. But GameStop is a business that was on the brink of bankruptcy and everybody was betting against it for good reason. And now the company is making more money than it's ever made in its history.
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Ed11:31
Ryan Cohen, CEO of GameStop, you're sticking around. We're going to take a break and then we're going to talk about that business, GameStop, and what it's doing. We'll be right back. This is Bloomberg Tech.
Okay, we're live on Bloomberg Tech with GameStop CEO Ryan Cohen. Let's put the eBay deal, potential deal aside for a moment. Whatever happens with eBay, GameStop's still one of the biggest names in gaming. I get a lot of questions about that. And Ryan, if you're up for it, let's start with Grand Theft Auto 6. You know, it's expected to be one of the biggest entertainment launches ever. You go to gamestop.com, pre-orders are available. What are you seeing? What are customers telling you?
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Ryan Cohen12:15
Ed, I want to go back and talk about eBay.
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Ed12:19
I want to know if you wanted to build the trillion dollar business and you had the existing management team, the guy running the company, makes $30 million bucks a year, hasn't bought a single share in the open market, and then you have someone that's committed $500 million. Me, we don't have to talk in hypotheticals. Who's more competent and capable of building a larger business?
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Ryan Cohen12:47
I want you to look your viewers in the eyes and tell them, are you going to bet on an entrenched management team running the business or me, someone that went head-to-head against Amazon, selling 30 lb bags of dog food, turned around a very tough situation at GameStop, and now the company's making lots of money.
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Ed13:09
I really want to know your opinion. Ryan, I'm not going to answer the question. The audience doesn't care what I think about this deal. They're here for you. But the link to Grand Theft Auto 6, for what it's worth, GameStop has 2200 stores across the jurisdictions it operates in, right? It sells hardware, video games, consoles that are going discless at some point. You need to hire people for those stores. People are looking at what they know about the proposed structure of this deal that's on the table and trying to understand in part what you talked about earlier, right? Taking the costs out of the combined business to understand what the plan is here, what the master plan is for the combined entity. So, let's go with that. What is the synergistic play here between eBay, the e-commerce business, and GameStop, which right now is a brick-and-mortar business selling video games, consoles, collectibles.
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Ryan Cohen14:09
We are going to unlock live commerce. We're going to use the stores for same day authentication. I'll give you an example. Let's just talk about trading cards right now. The biggest issue on eBay is fraud. So they've done really well on authenticity guarantee because you know when you buy an item now and it's got the AG certification, it's legit. It's going through a centralized model right now. So the seller's shipping it, costs a lot of money. There's a few fulfillment centers, takes some time, and then it goes to the buyer. Can ultimately go once these businesses are together. We've got 1,600 nodes. They're within a 15-minute drive of 80% of the population and you can authenticate the item same day for cheaper. So that's just one item. Live commerce, the business is getting smoked. Live commerce is a trillion dollar addressable market. It's really, really big in Asia. There's some competitors in the US that are doing very, very well. eBay is not doing very well. So the ability to go and use our nodes as studios and as fulfillment and logistics for content creators is huge. And then we have a bit of experience in gaming when it comes to the buy, sell, and trade model. So the ability for us to use eBay's rails to build out an in-game digital marketplace is huge. So those are just some of the opportunities to take this business and build it into something that the existing management team on a standalone basis can never do.
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Ed16:00
So the situation is collectibles are clearly a central part of the plan, right, if this deal goes through the combined entity on gaming. It sounds like you are preparing for a world where gaming is discless. There will be a trade-in, secondhand trade-in. But that this is the umbrella point, right? Like if the hardware makers Sony, Xbox are reportedly moving to discless on the console side, future game launches are digital only. Where does that fit in for your business plan in the combined entity?
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Ryan Cohen16:36
It doesn't matter. It doesn't matter at all. Software. It mattered in the past. Software today makes up less than 12% of the business and collectibles makes up over half the business. So, it's totally, totally irrelevant.
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Ed16:54
Is there anything that you learned from the NFT marketplace experiment at GameStop that you think you can put into practice if the deal goes through in this combined entity? What was the takeaway for you from that?
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Ryan Cohen17:10
What does that mean?
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Ed17:13
GameStop has looked at digital business lines outside of the physical world. What did you learn from GameStop looking at those markets?
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Ryan Cohen17:24
Do you know how much money GameStop is making today?
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Ed17:27
Please.
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Ryan Cohen17:28
$143 million in Q1. Highest operating earnings in the company's history. They were surprised at the strength of earnings recently, but again, you know, the audience... because everybody in the media wants GameStop to fail. Explain that to me, Ed. Why everybody in the mainstream media wants GameStop to fail? You've got, there's nothing more American than GameStop committing its balance sheet and this company which is a great American company, eBay, being aligned with shareholders. That's how this country was built, is risking your own capital and if the business succeeds you make money and if the business fails you lose a lot of money. And what I want to understand is why everybody wants GameStop to fail, both its core business and in this transaction. What world do we live in where we're betting against, we're rooting for the entrenched management team that has no skin in the game and someone that's risking their own capital? And there's nothing more American than that. You want us to fail. I want to understand that.
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Ed18:50
Ryan, I'm a technology journalist. I host the tech show on Bloomberg. When this deal broke in May, I and my team invited you onto the show. And it took a number of months. You're now here on the show. And in advance of you coming on the show, I posted on social media that you were coming on the show. I always give our audience the opportunity to ask their questions. That's what we're doing here, giving you an opportunity to present. I think that the one outstanding thing is people asking when will they see a sort of codified plan from you, a business plan presented for this combined entity on paper. You've explained a bit of it in the course of this conversation, but that's why the audience is here to listen to you to explain the future of a business that is a combination of GameStop and eBay.
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Ryan Cohen19:42
Well, I'm going to bring that plan directly to shareholders. It's not going to be through a TV show. You can count on it. It's going to be directly to shareholders.
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Ed19:54
And do you have a timeline for that, Ryan?
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Ryan Cohen19:58
We've had an influx of parties that have come to ask and they're interested and in due course the plan is going to be made public, but in the short term it involves building a much larger business. I mean, you know, what is the goal of business? What is my goal? I own a lot of stock and I don't have any perverse incentive. So, it's to make the business a lot more profitable and to maximize shareholder value. So, that's the plan. It's not that complicated. And I've spoken about huge growth areas within cutting costs. That's just short term, but live commerce and building out an in-game digital marketplace. So, I've shared that with you, but everyone in the past have said, 'What's the business plan?' What's the business plan? But they only do that with GameStop for whatever reason. Well, you know what the business plan is? It's to make money. GameStop just reported its highest earnings in the company's history with a fraction of the stores and everybody in the media said GameStop was going to fail. So, the plan is to make more money. The plan is to maximize shareholder value. Am I going to go and share my proprietary plan and every single detail and give it out to my competitors? That would be a pretty stupid thing to do.
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Ed21:30
Ryan, we have literally 30 seconds left in the show. Again, are you prepared to raise your offer for eBay? You set out your vision, but the action you're willing to take to do it.
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Ryan Cohen21:44
I'm not going to call my shots, but we're coming for eBay one way or another.
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Ed21:50
Ryan Cohen, CEO of GameStop, an extended conversation on Bloomberg Tech. Thank you for your time.