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The problem with GameStop’s bid to buy eBay is that it’s half cash, half stock. GameStop, a company with $9 billion of cash and a stock market capitalization of about $10 billion, wants to pay $28 billion of cash and $28 billion of stock for eBay, a company with a stock market capitalization of about $48 billion. [1] The cash is more or less fine; GameStop’s Canadian bank is “highly confident” that it could raise the money. And the problem with the stock is not that a $10 billion company can’t issue $28 billion of stock: Technically GameStop can’t (it doesn’t have enough authorized shares), but that is a solvable problem, and there is no general rule that a company can’t issue more shares than its current market value. If the stock market says you are worth $10 billion, but you want to issue stock to acquire a $28 billion asset, then your stock market value after the acquisition should be $38 billion, fine. The problem is that, in issuing $28 billion of stock to buy eBay, GameStop would essentially be issuing $28 billion of eBay stock. Current eBay shareholders would get shares of a combined GameStop/eBay that is almost all eBay. The enterprise value of eBay is something like $51 billion, including debt. The enterprise value of GameStop, meanwhile, is less than $10 billion, because it has $9 billion of cash. (It has about $4.4 billion of debt, for an enterprise value of about $5.7 billion.) You can think of GameStop’s $10 billion market capitalization as being made up of (1) $5 billion of net cash plus (2) $5 billion of GameStop. GameStop successfully converted its meme-stock status, over time, into actual cash, which is good. But if it gives eBay that cash in the acquisition, then you are combining a $5 billion video game retailer with a $51 billion internet company. Virtually all of the value in that company is eBay’s business, not GameStop’s. [2] And so if you are an eBay shareholder, the proposition being offered to you is something like “you can continue to be an eBay shareholder, but in a weird way.” Specifically:
- You’ll get a levered recap of eBay: eBay will borrow $20 billion and pay it out to shareholders.
- You’ll keep your shares of eBay: Roughly half of your investment will be cashed out in the levered recap, but the rest of it will stay in the company. “The company” here is almost entirely eBay, but technically GameStop will be folded into it too.
- The new eBay-with-a-little-GameStop will have a slightly different business model than the old eBay. Still mostly eBay, but now you’ll be able to … go to GameStop stores to get your collectibles graded to sell on eBay? “A national network for authentication, intake, fulfillment, and live commerce,” GameStop has proposed. Sure!
- It will also have very different management: Ryan Cohen, GameStop’s chief executive officer, would take over as CEO of the combined company.
- It will also have, perhaps, somewhat different stock price trading dynamics. In that GameStop has historically been a meme stock and eBay has not.
In other words, the appeal of this deal to shareholders is not its stated dollar value, not what they would get in a deal. The appeal of this deal to shareholders is (1) Ryan Cohen’s management and (2) meme-stockery. [3] Is that appealing? I dunno. In its offer letter, GameStop made the case that its managers would cut costs and run eBay more efficiently than current management, and that they have some track record of doing that at GameStop. The meme-stock stuff is more implicit. We talked last week about Cohen listing his socks for sale on eBay to help finance the deal. You won’t get that sort of creative … financing? publicity stunt? … from a standalone eBay. GameStop is really offering eBay shareholders nothing except Cohen. They would not be bought out at a premium; they would just get a leveraged recap (which eBay could do on its own if it wanted to, and probably more easily than GameStop could) and shares of their own company run in a somewhat zanier way. A lot of people would take that deal! GameStop shareholders, for instance! I spend a lot of time around here writing about meme stocks, and I am not going to discount the value of zaniness in corporate finance. Other people, though, would not take that deal. EBay’s board, for instance:
EBay Inc. rejected a $56 billion takeover offer from GameStop Corp. Chief Executive Officer Ryan Cohen, describing the unsolicited bid as “neither credible nor attractive.”
EBay’s board turned down the offer after taking into account “uncertainty” around the financing plan, the operational risks involved and GameStop’s governance, Chairman Paul Pressler said in a letter addressed to Cohen. Pressler also cited GameStop’s executive incentives and a takeover’s potential impact on eBay’s long-term growth.
Here is eBay’s press release, which contains Pressler's rather curt letter to Cohen. The proposal is not “credible” because of “the uncertainty regarding your financing proposal,” and it is not “attractive” because of “the impact of your proposal on eBay's long-term growth and profitability,” “the leverage, operational risks, and leadership structure of a combined entity,” and “the resulting implications of these factors on valuation.” Cohen’s proposal involves giving eBay shareholders (1) $28 billion of cash, which he doesn’t have, and (2) $28 billion of stock in their own company, which — eBay says — would be worth less under his plan. Also for some reason eBay published Cohen’s “highly confident letter” from TD Securities (USA) LLC, in which TD asserts its confidence that, if GameStop did acquire eBay, TD could raise $20 billion of investment-grade (?) debt to finance the transaction. [4] Lots of hostile takeovers used to get done on highly confident letters, but they’re somewhat out of fashion these days and I’m not sure I’ve ever read one. Now targets tend to expect commitment letters from banks. In the cold light of 2026, I am not sure that this letter should make you highly confident that the deal could actually be financed. It did not have that effect on eBay’s board. What next? One possibility is “lol never mind”: Nobody seemed to be all that serious about this takeover, we all had a good laugh, and now eBay has rejected it. GameStop bought almost 5% of eBay’s stock before announcing its proposal, and is probably sitting on a nine-figure profit at this point. (Its purchase price is not disclosed, and almost all of its 22.2 million shares are owned synthetically using derivatives, but it entered into at least half of those derivatives on March 4, when eBay was trading at around $91.03; the stock closed at $108.13 yesterday. Even if you assume an average purchase price of $100, you get a paper profit of about $180 million.) It could sell those shares [5] at a nice profit and go home. In general, it is frowned upon to buy stock in a public company, announce a fake takeover, and then sell the stock at a profit, but I think the facts here are benign enough — the takeover proposal has a veneer of reality, and the stock is mostly not up because of it — that it’s fine. The other, much funnier possibility is:
The rejection leaves Cohen with the option to try to pursue a proxy fight to replace eBay board members, a move that could take more than a year. He had previously said he’s prepared to take his plan straight to shareholders should the board turn down his offer.
No? I mean, I hope he’ll do this, but I doubt it. If you are looking for zaniness, then GameStop running a proxy fight to take over a company 10 times its size is pretty much what you want. As a financial columnist I am always looking for zaniness, and I gather that GameStop shareholders are too. EBay shareholders, maybe not. Oh, elsewhere, yesterday GameStop disclosed that it will ask its shareholders to authorize issuing up to another 1.5 billion shares, which would maybe (?) cover the eBay transaction. [6] “The Board is requesting the Authorized Shares Amendment to enable the Board to issue additional shares of common stock for general corporate purposes,” GameStop says, so I suppose eBay is not exactly top of mind.
The basic economics of artificial intelligence are:
- Utilities, real estate developers, chip manufacturers and big tech companies will spend trillions of dollars to build computing infrastructure.
- They will rent this computing infrastructure to small teams of recent graduate students who met each other six weeks ago and just raised a billion dollars of venture capital.
- The small teams of recent grad students will build AI tools to do stuff — cure cancer, allocate capital, replace all professional knowledge work, enslave humanity, whatever — that generates trillions of dollars of value, [7] which will be more than enough to pay back the trillions of dollars invested in the infrastructure.
Or not — maybe this is a mistake and a bubble and the data centers will ultimately sit empty, monuments to our collective folly — but let’s just assume it’s correct. If it’s correct then it all works, at a societal level: Money goes in in, it builds productive assets, the productive assets make profits, money goes out. The return on investment is attractive, so the investments should get made. But the weak link is the recent graduate students. The weak link is that if you are a developer building an AI data center, and you go to a bank for a construction loan, the bank will probably ask something like “well, can you get tenants to rent this computing power?” And you will say “oh yes people love computing power.” And the bank will say “okay, who are your anchor tenants?” And you will say “oh they haven’t even been founded yet; it will take us a year to build this data center and by then all the AI companies will be different.” And the bank will say “hmm, hmm.” That is: In the aggregate, all this AI infrastructure seems like a good credit bet, which is why it keeps getting financed. But it is hard to underwrite an AI data center based on its tenants, because the AI industry is so new and scrappy. There are some giant creditworthy companies signing up for this computing power, but a lot of the action in AI really is in small teams of quirky graduate students with venture funding. In some sense they are the best people to buy your computing power — they have lots of venture funding and a good chance of actually doing world-changing trillion-dollar stuff — but they might not impress the bank. They are scruffy and uncommercial and do not have audited financial statements or profits. There are some standard solutions to this problem. (Basically: A big tech company uses its own credit to build the data center, because it knows the business and is willing to bet that it can use or sell computing power in the future. [8] ) But the more general solution is a market. What you want is to say to the bank: “Look, I honestly have no idea who will buy my computing power when my data center is finished in a year. A year, in AI, is an eternity. But someone will buy it, maybe some current giant tech company, or maybe some current leading AI lab that will be a giant public company in a year, or maybe a scrappy startup, or for all I know maybe an autonomous AI agent that comes into some money. But someone will buy it, and I can prove it, because there’s a market for computing power starting in a year, and the market price is $X, so if I sell my computing power at $X I can pay back this loan.” Bloomberg’s Silla Brush and Katherine Doherty report:
US derivatives exchange CME Group Inc. and index provider Silicon Data are teaming up to create a futures market for computing power, a key source driving the AI boom.
The futures will help traders, financial firms, AI builders and cloud providers manage volatility and price swings, according to a statement Tuesday. Indexes from market-intelligence firm Silicon Data will help underpin the products. The project is still pending regulatory review.
Computing power, also known as compute, has been in high demand as AI companies use it to power their systems. BlackRock Inc. Chief Executive Officer Larry Fink said last week that a new asset class will likely be buying futures of compute given the shortage and high demand.
Here is the press release. “Investors need a trusted futures market to provide transparency, liquidity and effective risk management,” says CME. If you can lock in the future price of computing capacity, then building computing capacity is a less speculative endeavor. You’re not building a data center hoping to sell compute to the AI startups of the future; you’re building a data center knowing that you can sell compute at the futures price that you’ve locked in.
Elsewhere in weird acquisition structures:
BuzzFeed said media mogul Byron Allen has agreed to pay $120 million for a majority stake in the digital-media company.
Allen, whose company Allen Media Group owns the Weather Channel and more than 30 network affiliate broadcast channels, plans to acquire 40 million shares for $3 apiece, BuzzFeed said Monday.
Upon closing, Allen’s affiliate Allen Family Digital will own 52% of BuzzFeed’s shares outstanding. The deal will be funded with $20 million in cash and a $100 million promissory note due five years from closing, which will accrue 5% in annual interest. ...
Allen will also take over as chief executive and chair, while BuzzFeed founder Jonah Peretti will transition to a newly created role as president of BuzzFeed AI.
As of yesterday, BuzzFeed had a stock price of $0.73 per share and about 36 million shares outstanding, for a market capitalization of a bit less than $30 million. Allen is buying 40 million new shares — from the company; existing shareholders are keeping their stock — so he will own a majority of the stock. At yesterday’s prices that would have cost him about $30 million, but he’s paying a nominal price of $3 per share, or $120 million total, for a majority of the company. But that price consists of $20 million in cash ($0.50 per share) and a $100 million non-recourse promissory note. From BuzzFeed’s filing:
On the Closing Date, the Investor will issue a Promissory Note to the Company in the principal amount of $100.0 million. The Promissory Note bears interest at a rate of 5% per annum, with interest payable semi-annually on the last business day of each June and December. The Promissory Note matures on the fifth anniversary of the Closing Date. The Promissory Note is secured by a first priority security interest in 33.3 million of the Shares, and the Company understands that the Investor currently holds no assets other than the Shares.
The “Investor” is not Byron Allen personally, or his company, but rather a new shell company called Allen Family Digital LLC, which “holds no assets other than the Shares.” “Allen could presumably walk away if he doesn’t like how things are going in a few months’ time,” notes Martin Peers. So Allen is effectively paying $20 million — $0.50 per share — to rent control of BuzzFeed for up to five years. (Plus another $2.5 million in interest every six months.) If he fixes it up and it becomes worth more than $3 per share, he’ll pay another $100 million — another $2.50 per share, $3 per share total — to convert that rental into ownership. (And then he can, presumably, sell the stock for like $5 per share and make a profit.) It’s a $20 million bet that BuzzFeed will be worth at least $240 million, or rather, it’s a $20 million bet that he can make it worth that much.
Many private companies have transfer restrictions on their stock: Investors are not allowed to sell their stock without the company’s approval, and the company might be stingy with its approval. If I try to sell you my stock without the company’s approval, it doesn’t work: The company does not register the transfer on its shareholder registry, and you do not actually get the stock. The company wants to know its shareholders, avoid surprises, keep employee-shareholders locked up, etc., so it might not allow a lot of transfers. Public companies can’t really do this. I mean, a little: Employees normally get their stock subject to some vesting periods, and some big shareholders might sign lockup agreements, but in general the thing that makes a public company a public company is that its stock trades freely on the stock exchange. A lot of very big household-name private companies — SpaceX, OpenAI and Anthropic are the biggies — are expected to go public in the next year. This suggests an obvious workaround:
- I have Anthropic stock that I can’t sell.
- But when it goes public, I will be able to sell it.
- You really want to buy Anthropic stock.
- You give me some money now.
- I give you an IOU saying “when Anthropic goes public and I can sell my stock, I’ll give it to you.”
- It goes public, and I give you the stock.
This is called a “forward contract” and is fairly common. A few general facts about forward contracts:
- The company can, and probably does, prohibit them. Transfer restrictions are normally written in quite broad ways, and if Anthropic says “you can’t sell your stock without our permission,” it probably also says “you can’t sell your stock in a forward contract without our permission.”
- But people sometimes ignore that prohibition, because what can Anthropic do about it? If I sell you my stock today, Anthropic can refuse to register the transfer and you don’t get the stock. Anthropic is necessarily involved in a current transfer of stock. But the forward contract is just a contract between me and you, and Anthropic never needs to know about it. Eventually Anthropic goes public, my stock gets unrestricted and I give it to you when I’m allowed to. Anthropic never finds out about our forward contract. What’s the problem?
- That said, this is risky. What if I sell you my Anthropic shares forward, and Anthropic goes public, and you come to collect, and I say “nah actually I’d rather keep the shares”? You can sue me for the shares, but I can point at the Anthropic document saying “forward contracts are null and void”; maybe the contract will be null and void. Maybe Anthropic will come to court and say “no, those transfers are void and so the shares belong to us now.” Buying shares under an illegal forward contract creates a risk that you won’t get the shares.
- Also, just, consider the situation here. I come to you and say “hey I have some Anthropic shares, I can’t sell them now but I’ll sell you a forward on them.” You say “isn't that not allowed?” I say “oh sure it’s not allowed but I am a rebel, I’m not bound by those pesky rules.” You’re like “okay I guess” and give me money, now, for shares in the future. How do you know I even have the shares in the first place? What if I’m just lying? You already know that I am willing to break some rules; what if I’m breaking the rules against fraud?
We talked about this in 2024, when Stripe published an explicit threat that if you bought Stripe shares under forward contracts Stripe would take them back from you. And now Anthropic and OpenAI have updated their own disclosures to make similar threats. Anthropic:
We are also aware of investment funds that claim to offer indirect access to Anthropic stock. These funds often market themselves by saying something like: "You can't invest in Anthropic directly, but invest with us and we'll get access for you." These funds are most likely relying on mechanisms that attempt to circumvent our transfer restrictions. Any third party claiming to sell Anthropic shares to the general public—whether through direct sales, "forward contracts," tokenized securities, or other mechanisms—is likely either engaged in fraud or offering an investment that may have no value due to our transfer restrictions.
OpenAI:
We are aware of firms that market unauthorized opportunities to gain exposure to OpenAI through a variety of means, including:
- sales of OpenAI equity;
- investments in SPVs that own OpenAI equity;
- tokenized interests in OpenAI equity or an SPV holding OpenAI equity; and
- “forward” contracts and other forms of purported economic interests.
OpenAI does not endorse or participate in any of these transactions, which are a violation of our transfer restrictions and may result in the invalidation of the underlying equity. Any transfers may also violate US federal or state securities laws, which impose significant restrictions on transfers of privately offered equity. A buyer or seller may have liability for those violations, and the transfer may be rescinded.
These companies are not exactly opposed to allowing some liquidity in their stocks; we talked on Monday about OpenAI letting each employee sell up to $30 million of stock in a recent tender offer. But these are also companies that are gearing up for initial public offerings, and they want as much demand as possible in their IPOs. If OpenAI and Anthropic’s shares are scarce, then a lot of people will rush to buy them in their IPOs. If anyone who wants their shares can buy them now, who will buy in the IPOs?
Many white-collar jobs involve two sorts of tasks:
- Doing stuff that advances the mission of the company: making sales, building features, writing newsletters, whatever.
- Looking busy: meeting prospective customers who’ll never buy your stuff, making pipeline spreadsheets so your boss knows about your meetings with prospects who’ll never buy your stuff, staying in the office until your boss leaves, etc.
The first task is the only important one, and most chief executive officers would probably tell you that they only care about employees doing actual work and don’t care about “face time.” But in fact most companies seem to have a lot of face time. The useful work is often less legible and harder to measure than the busywork, so bosses might use the busywork — the dashboards and pipelines and time in the office — as a crude proxy for real work. And employees probably underrate the value of what looks like busywork: Just being at the office a lot can help generate ideas; going to lots of apparently-hopeless sales meetings can sometimes generate sales. One possibility is that AI will do all of the useful stuff, which will increase the importance of the busywork: White-collar employees will have to spend all their time looking busy so they don’t get fired and replaced by AI. Another possibility is that AI will do all of the useful stuff, which will eliminate the busywork: Face time will stop being a meaningful proxy for productivity, and a new norm will develop of “just have AI do your job and go home.” But a third, weirder possibility is that AI will take over the job of looking busy. The Financial Times reports:
Amazon employees are using an internal AI tool to automate non-essential tasks in a bid to show managers they are using the technology more frequently.
The Seattle-based group has started to widely deploy its in-house “MeshClaw” product in recent weeks, allowing employees to create AI agents that can connect to workplace software and carry out tasks on a user’s behalf, according to three people familiar with the matter.
Some employees said colleagues were using the software to automate additional, unnecessary AI activity to increase their consumption of tokens — units of data processed by models.
They said the move reflected pressure to adopt the technology after Amazon introduced targets for more than 80 per cent of developers to use AI each week, and earlier this year began tracking AI token consumption on internal leader boards.
“There is just so much pressure to use these tools,” one Amazon employee told the FT. “Some people are just using MeshClaw to maximise their token usage.”
In the olden days people tried to look like they were working late by, like, hanging a jacket over their chairs when they went home, but now autonomous AI agents can automate that.
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