Unintentional merger just to boost stock prices? GameStop Corp. Class A (GME.US) "swallowing an elephant" acquisition of eBay motives doubted, arbitrageurs stay away.

At first glance, the shocking $56 billion acquisition proposal by GameStop Corp. Class A (GME.US) for eBay (EBAY.US) seems to offer lucrative returns for investors willing to bet on this unprecedented deal. However, the reality is that M&A professionals are not optimistic about this transaction. The acquisition was planned by the head of GameStop Corp. Class A, billionaire Ryan, and was officially announced on Monday. GameStop Corp. Class A proposed to acquire eBay through a cash and stock offer of $125 per share, representing a premium of about 20% over eBay's closing price on the Friday before. As of last Friday, GameStop Corp. Class A had a market value of about $12 billion, while eBay's scale was much larger, with a market value of about $46 billion. As of Thursday, eBay's stock price was around $107, creating a price difference of about $18 from GameStop Corp. Class A's acquisition offer. In fact, since the acquisition proposal was announced, this price difference has continued to widen, indicating a lack of confidence in the market regarding this deal. The gap between the bidding price of GameStop Corp. Class A and eBay's stock price remains significant. Usually, arbitrage investors are willing to bet on large M&A deals, but this transaction has many doubts, and industry professionals are staying away. The most crucial issue is the lack of details in the deal structure, making it difficult to establish arbitrage positions and gauge the probability of the transaction going through. Many market participants even question the motives behind Conn's, Inc.'s acquisition. In addition to the commitment from Daimler Bank to provide $20 billion in debt financing, GameStop Corp. Class A has about $9 billion in cash on hand and holds a 5% stake in eBay. However, there is still a significant gap in raising equity funds. Moreover, Daimler Bank's financing commitment is not set in stone. Even if the cash portion of the funding is in place, GameStop Corp. Class A would still need to issue a large number of new shares, potentially exceeding 1 billion shares. Rough estimates suggest that this issuance would double its existing share capital and may even surpass the current statutory limit on the number of authorized shares. The motive behind the acquisition is being questioned: Is it not really about M&A but about boosting stock prices? In summary, the unclear terms of the deal, the huge funding gap, and unprecedented dilution pressure on equity make this transaction significantly deviate from the logic of conventional M&A deals. Arbitrage investors are skeptical about whether eBay will participate in this acquisition. Some market views speculate that Conn's, Inc.'s move is not genuinely about seeking a merger but about raising GameStop Corp. Class A's stock price through unconventional means. For all these reasons, arbitrage traders are cautious and hesitant to move forward with this deal.