The GameStop (GME)-eBay (EBAY) Merger: Is It that Crazy?

In the past few years, GME has been seen as a declining business and the ultimate meme stock, looked down on by institutional investors due to its speculative nature and lack of a strong vision about the future. If they acquire EBAY, GME will no longer be seen just as a meme stock but as a legitimate player in the US e-commerce space, giving them the much-needed business pivot.

EBAY has a market share of 3.5% of the US e-commerce space (3.5% seems small, but in the context of one of the largest e-commerce markets, that’s a lot, and it’s only behind AMZN, WMT, APPL).

Source: emarketer

To understand the strategic essence of the deal, we need to learn about the collectable industry. The collectables industry is basically the sale of commercial items that people gather for nostalgia, emotional connection, or investment potential.

It includes a few categories such as art and antiques, toys and action figures, and very fast-growing product lines like Pokémon cards and Sports cards. Sports cards are increasingly treated like a stock market for athlete performance (if you buy a card of an athlete, and that athlete's performance is good, the value of the card will go up).

The current global total addressable market (TAM) of collectables is approximately $320 billion - $322 billion in 2025, but it can triple in the coming 10 years. This massive growth is driven by a combination of a few factors: 1) transition of collectables as a niche hobby towards becoming an alternative investment asset class; 2) digitalization of the collectables marketplaces, and 3) nostalgia towards the pop culture among millennials and Gen Z.

In 2025, GameStop’s collectables revenue jumped 48%, now accounting for over 29% of total sales, and eBay is the world's largest secondary market for trading cards and collectables. Cohen’s vision is to migrate eBay’s massive digital volume into GameStop’s physical infrastructure.

This deal is just a vertical integration where the seller of a sports card goes to a GME physical store, GME charges a fee to authenticate/grade the card (to make sure it’s not fake), then GME either buys the card or helps the seller list the card on eBay. Basically, GME becomes the toll collector for the whole collectables industry.

The first reactions of the investment community were very skeptical, classifying the deal as a joke, as crazy as it seems, there is a certain reasoning here.

Critique 1: Gap in market cap

GameStop is looking to buy a much larger company, considering that it is now a $10.9 billion market cap company, and eBay is $46.7 billion—almost 4x its market cap. 

However, if we look at the PSKY-WBD deal, we see how a smaller and more leveraged firm can acquire a much larger one (WBD is a $67.6 bn market cap while PSKY is just $12.37bn), so size does not necessarily matter here. Also, GME can get support/capital from many potential sources – private equity funds, Middle Eastern investors, or Trump-related investors.

Critique 2: Dilution

Huge dilution of GME shareholders is expected – GME needs to issue more equity. In GME's defense, we need to say that as of now, Ryan Cohen owns around 9% of GME. This makes us believe that Cohen is very confident that this deal is a huge positive for GME. Why would he want to dilute his own stake?

Critique 3: Anti-Competitive

The deal may be seen as anti-competitive, but that’s a low chance considering AMZN is still a dominant force in the industry.

Critique 4: Cohen cannot Improve EBAY

The proposed cost cuts of $2 billion may spook current investors and management of $EBAY, as this kind of aggressive action may cut too deep and affect the stable performance of the company recently, or simply be seen as too unrealistic.

However, Cohen did turn around the GME business, making it more profitable. Within 2 years, GME revenue declined with 32%, but profit improved significantly, from $6.7mn in January 2024 to $418.4mn in January 2026. The operating cash flow also went in a similar direction from negative $203.7mn in January 2024 to positive $614.8mn in January 2026. This gives a certain credibility to Cohen if he must take over EBAY.  Not to mention that Cohen is a co-founder of Chewy (CHWY), the largest e-commerce player for pet food.

If we use the current price range of GME stock, we expect GME to issue more than 1 billion extra shares, nearly 2.5 times more than the current outstanding number, which means enormous dilution, but if we make a brief calculation, the upside in the EPS outweighs the dilution effect.

Net: $2,449mn (combined GME and EBAY Net Incomes in 2025) + $2,000mn (cost savings) - $1,700mn (interest expenses) = $2,749mn net income of the combined entity after synergies; 

If the deal fails, there is a slight upside for both GME and EBAY. EBAY management may seek someone else to join a potential bidding war with an even higher price, providing upside optionality for both EBAY and GME, as an EBAY shareholder.

There is a possibility that Cohen may bluff, and that’s his original plan indeed. GME wants to attract someone else to buy EBAY, such as Shopify, so they sell their 5% stake at a premium

If the deal succeeds, GME will acquire a strong business at a rather reasonable price, and GME won’t be a meme stock anymore but a serious contender to dominate the lucrative collectables industry.