GameStop Shares Edge Up 1.3% as Meme Stock Steadies While Investors Track Ryan Cohen's Pursuit of eBay

GameStop Corp. shares edged higher on Wednesday, recovering slightly after recent losses as investors continued to weigh Chief Executive Ryan Cohen's ambitions to transform the video game retailer through a takeover of eBay.

GameStop shares rose 31 cents, or 1.31%, to $23.66 in late-morning trading on the New York Stock Exchange at 11:13 a.m. EDT.

The gain came after the stock fell 3.71% on Monday to close at $23.90 and slipped further on Tuesday. The broader market was mixed on Wednesday ahead of the Federal Reserve's interest rate decision.

GameStop did not release any news on Wednesday.

The eBay bid

GameStop has been at the center of one of the year's most unusual takeover battles.

In May, the company made a nonbinding offer to buy eBay for $125 a share, or about $56 billion, in a deal split equally between cash and GameStop stock. GameStop said it had a $20 billion debt commitment to help fund the purchase, along with about $9.4 billion in cash.

eBay's board rejected the offer, calling it "neither credible nor attractive." The board noted that eBay's market value was nearly four times GameStop's and questioned how GameStop would finance the deal. It also cited risks related to leverage, execution and governance.

GameStop has kept up the pressure. It raised its stake in eBay to nearly 10%, or about 43.4 million shares, according to a regulatory filing reported in July. Cohen has said he wants to run eBay and is prepared to take his case directly to eBay shareholders if the board continues to refuse.

Cohen reportedly committed about $500 million of his own money to the effort.

Shareholders approve share increase

At its annual meeting in July, GameStop shareholders approved all proposals, including an amendment increasing the company's authorized shares of Class A common stock. The amendment received 68.7% of votes cast.

The company said the change "provides the Company with the capacity to issue common stock in connection with strategic transactions," including the proposed eBay acquisition.

Skeptics remain

The eBay pursuit has drawn skepticism on Wall Street. Some analysts question whether GameStop, whose core business of selling video games and consoles has been shrinking, can successfully take over and run a much larger company.

Michael Burry, the investor known for his bets against the housing market before the 2008 financial crisis, said in May that he had sold his entire GameStop stake after the bid was announced.

Analysts' consensus rating on GameStop is "strong sell," with an average price target of about $13.50, according to market data reported in July.

Core business shrinking

GameStop's traditional retail business has struggled as video game sales shift to digital downloads and streaming. The company has closed dozens of underperforming stores and cut costs to improve profitability.

Analysts expect earnings of about 20 cents a share for the current quarter, down about 17% from a year earlier, on revenue of about $722.5 million, down 12%, according to Zacks consensus estimates. For the full year, analysts expect revenue of about $3.36 billion.

The company has built a large cash pile, partly by selling shares during periods of heavy trading in its stock. It has also invested in bitcoin.

Meme stock legacy

GameStop became the original "meme stock" in early 2021, when retail investors organized on social media drove its shares to dramatic highs and caused huge losses for hedge funds that had bet against it. Cohen, the co-founder of online pet retailer Chewy, became chief executive later that year.

The stock remains heavily traded by retail investors and can be highly volatile.

What to watch

Investors are watching for any new developments in GameStop's pursuit of eBay, including a possible proxy fight or revised offer. They are also awaiting the company's next quarterly results for signs of progress in its core business.

_This article is for information only and does not constitute financial advice._