What’s the Next Chapter Look Like for GameStop and eBay as the Former Moves Beyond Video Game Retail?

The recent negotiations, if they can be called such, between GameStop and eBay have captured attention and analyst opinion for some time now – most famously culminating in a $55.5 billion acquisition offer from the former aimed at the latter in May.

That offer, as Forbes contributor Mark Faithfull noted, was rejected by eBay as being “neither credible nor attractive.”

However, Faithfull argued that there actually might be a future relationship between GameStop (led by outspoken CEO Ryan Cohen) and eBay.

“It is now morphing into a potential partnership that could allow GameStop to turn its 1,600-store U.S. footprint into a physical infrastructure network for eBay, while giving the videogame retailer a stronger position in the collectibles market, which is rapidly becoming the center of its own business,” Faithfull wrote.

“Its latest results show that GameStop has moved beyond being a struggling videogame retailer or infamous meme stock and instead is looking for a new growth story, while Cohen has simultaneously built a stake worth almost $5 billion in eBay,” he added.

Some of the factors at play, according to the report:

• GameStop is buying in on eBay: Regardless of eBay’s apparent reticence on the buyout front, Cohen has led GameStop to holding a much more substantial position in eBay. The retailer now holds ~43.4 million eBay shares worth nearly $5 billion, or approximately 9.8% of the company. This makes GameStop one of eBay’s biggest shareholders.

• Revenue might be down, but GameStop is pivoting in a serious way: GameStops Q2 revenue dropped almost 20% to $790.2 million versus $972.2 million in the year-prior period. However, collectibles were up 57% to hit $356.3 million – equivalent to nearly half (45.1%) of the retailer’s total sales. Video games now represent just a third of GameStop’s sales, and the company is pivoting squarely to focus on merch, trading cards, toys, and PSA-graded Power Packs as kidult collectors show ongoing demand signals.

Does the GameStop / eBay Potential Team-Up Make Sense (and Can it Happen)?

On the graded or verified goods (from cards to other pop-culture artifacts) front, Faithfull suggested that a GameStop-eBay teamup might make more sense than it had previously.

“Cohen himself acknowledged in a June interview that a partnership could involve eBay using GameStop stores to verify rare collectibles. For eBay GameStop’s stores could provide touchpoints in a business that has historically been almost entirely digital, while for GameStop, eBay could provide access to a much larger marketplace and buyer base,” he wrote.

Notable obstacles remain. eBay has shown little interest in a buyout nor any formal partnership as yet, and the marketplace is growing – second-quarter gross merchandise volume improved 15% YoY to $22.4 billion and revenue was notched at $3.13 billion. Q3 revenue is projected to beat Wall Street estimates.

Faithfull put forth three likely scenarios: Cohen relentlessly pursues the eBay acquisition, with his growing share of company stock making him more influential; GameStop strikes a bargain with eBay to see further monetization of its own stores while also offering eBay a platform for authentication and fulfilment; or thirdly that GameStop sticks to its current mode of operating independently while remaining an eBay shareholder.

Questions for discussion:

Do you believe GameStop and eBay will end up striking a deal, whether a buyout or simply a mutually beneficial partnership, in the future? Why or why not?
Of the three paths presented by Faithfull, which do you see as being most likely? Is there a fourth option you'd like to add?
What's your take on GameStop's pivot away from its legacy product offering into the merch, collectibles, and graded goods market? Do you think this has longevity?