GameStop’s $56-billion bid was rejected by eBay as ‘neither credible nor attractive.’Scott Olson/Getty Images
Few people could have truly believed Toronto-Dominion Bank was “highly confident” it could help GameStop Corp. raise US$20-billion for its ambitious US$56-billion plan to buy rival eBay Inc.
Paul Pressler, chairman of eBay’s board of directors, made that clear on Tuesday in a letter to GameStop chief executive officer Ryan Cohen that called the May 4 offer “neither credible nor attractive.” But a closer look at exactly what TD was promising suggests the lender also lacked confidence in the deal.
“TD Securities is highly confident that funded debt of up to US$20-billion could be raised” by GameStop, Larry Wieseneck, head of corporate and investment banking at TD Securities, wrote in a May 1 letter to Mr. Cohen that referred to the eBay proposal as “Project Sling.”
However, Mr. Wieseneck added that his “expression of confidence assumes, among other things,” that the combined entity would receive investment grade corporate credit ratings “from at least two of S&P, Moody’s or Fitch.”
Meeting that condition would be a Herculean feat.
One day after GameStop made its offer, Moody’s Ratings bluntly referred to the proposal as a “credit negative” for eBay. By the end of 2025, eBay had roughly US$7.2-billion in total debt, Moody’s said, or roughly 2.3 times its annual earnings before interest, taxes, depreciation and amortization (EBITDA).
Adding the US$20-billion in transaction financing and GameStop’s outstanding debt of around US$4.2-billion and “total debt would soar to approximately US$31.4-billion,” Moody’s said. That represents an increase of more than 400 per cent relative to eBay’s stand-alone capital structure, equating to nearly 9 times the EBITDA of the combined company.
Companies with investment grade credit ratings typically have a debt load worth less than 5 times their average EBITDA. Those that significantly exceed that threshold are commonly rated as speculative or “junk.”
And that’s not all. Several of eBay’s bonds contain change of control provisions. Moody’s noted GameStop might have to raise additional debt to refinance those bonds. If that happens, Moody’s said at least two ratings agencies could downgrade eBay’s credit rating to one or more notches below investment grade.
Moody’s could be oversimplifying here. The math doesn’t factor in the possibility of the roughly US$12-billion in cash the two companies jointly possess – nearly US$3-billion at eBay and more than US$9-billion at GameStop – being put toward debt repayment. It also gives no weight to Mr. Cohen’s public commitment to rapidly repay debt and find US$2-billion in annual cost savings within 12 months of the deal closing.
S&P Global Ratings and Fitch Ratings Inc. could both conceivably see things from that perspective and give investment grade ratings to a combined GameStop-eBay and satisfy TD’s conditions, except that Fitch does not currently rate either company. GameStop, in fact, is not currently rated at all by the three top U.S. ratings agencies.
Even if S&P (which did not respond to a request for comment) gave the necessary but unlikely rating, TD could still renege on a non-binding commitment because its condition required two positive ratings.
This was clearly apparent to eBay and the broader analyst community from the outset.
“Uncertainty” regarding the financing was the second of six factors eBay’s Mr. Pressler said the eBay board took into account while “thoroughly” reviewing the GameStop proposal.
In a May 4 note to clients, Wells Fargo analyst Ken Gawrelski said eBay was likely to reject GameStop’s proposal “with plenty of uncertainty around deal financing.”
Even if eBay’s board endorsed the deal, UBS analyst Stephen Ju said in a May 4 note to clients that shareholders would find the funding plan dubious.
“We are skeptical as to whether eBay shareholders will vote positively on the transaction, given the open question as to how GameStop would finance the transaction,” Mr. Ju said.
TD, which declined to comment, would gain a lot if the eBay deal were to go ahead.
GameStop has recently become a major client for the Canadian lender, with TD acting as sole bookrunner for the company’s nearly US$2.7-billion convertible bond offering in June, 2025. Tim Wiggan, TD’s group head of wholesale banking, even referenced that deal at the bank’s 2025 investor day as evidence of an “accelerating” U.S. franchise.
Mr. Cohen might not be done yet. He could revise his bid or take his existing offer directly to eBay shareholders. But for now, it is little wonder why eBay did not consider “Project Sling” to be credible.