Three months ago I predicted that GameStop would acquire eBay, but I only focused on what Ryan Cohen had stated publicly and left out any of my own speculation. Even that seemed to be too far-fetched theory for some people, yet here we are.

In this post I will focus on what I believe to be the real reason why Ryan Cohen wants eBay specifically, when there are hundreds of other companies he could acquire and fix for much less effort. This too, will feel too far-fetched for some people. It's not.

The Boring Stuff

This is what we're told publicly: sleepy management, $2B+ wasted on advertisement, possibility to compete with Amazon, yada yada. These are all true, they are all aspects that Ryan can focus on to make eBay better, more efficient. But they're not unique, they're not special. They're not worth spending 4x of your own company's market cap.

See, Ryan could buy into any similar company with much less cash and much less risk, and he could just execute the same plan over and over again. Buying $45B eBay for $55B is not really much different from buying ten different $4.5B companies for $5.5B each, except he wouldn't have to take huge risky loans or dilute, as he could do it in smaller and safer steps. There are numerous companies out there for him to acquire and fix, but he clearly wants eBay for something special that no other company in the world can offer...

Where GameStop succeeded

GameStop is Ryan's baby, I believe it to be his Berkshire Hathaway. He's talked publicly about how he likes trading cards and how gaming was close to him as a kid.

When Ryan initially bought into GME, he probably didn't have one specific end plan, he just knew that the company was being driven to the ground by a malicious board and that it was worth saving. He knew that he could turn it profitable and come up with some form of modern digitalized GameStop in the future, he just probably didn't know what exactly. They then tested many things like the NFT Marketplace and GameStop Wallet, but those clearly didn't bear fruit.

And then they found it.

>“All of a sudden we see the GameStop customer really when it comes to trading cards, there’s a strong appetite. That category has done very well and we’ve gone from 10% of our sales to close to a third for the full year is going to come from collectibles.”
- Ryan Cohen

Not only are they already seeing insane +60% YoY collectibles growth within GameStop, but collectibles market itself is expected to grow by 67% by 2033. And GameStop has the ultimate tool for that market: Power Packs.

For context, Valve makes around a billion dollars every year with CS2's cases, a very comparable product in a ~$5 billion market. Now imagine Power Packs when the collectibles market is expected to be half a trillion dollars.

Where GameStop failed

So why not just scale collectibles and Power Packs? They're almost like a digital product, they can be scaled fast and they have great margins. Why risk everything for a leveraged buyout of eBay?

Well, let's see how well Power Packs are really doing.

Here's a post of Power Packs being sold out 7 months ago.

And here's a post of Power Packs being sold out just 4 days ago.

And here are some more quotes from the CEO himself:

>"If you look at digital Power Packs, we’ve kept it pretty limited in terms of being able to get into the digital category and frankly it’s not a marketing thing, we just can’t get enough inventory — and it’s the same thing on the physical thing"

>"Can't get enough inventory, at least at a price where we can — you can buy inventory at 110% or 120% market value, but we’re not going to start doing stupid stuff like that."

>"The way it stands right now is we're selling the product very quickly. The more inventory we have, we can sell the product."

A growing half a trillion dollar market with great margins and a perfect product, but they simply can't get enough inventory.

The End Game

I have no doubt in my mind that Ryan won't also fix eBay's financials. If there's billions of dollars to be trimmed, he will trim them. But for a purchase of $55B, that alone is not worth the risk, he could just trim some smaller companies instead. My belief is that he's buying eBay for the collectibles inventory and marketplace specifically.

See, they do have an $8B warchest that they could use to buy trading cards with, but that is not a good use of their money. Like Cohen himself said, they would have to do "stupid stuff like buy inventory at 110% or 120% market value". They would also spend a ton of time and effort on simply finding the sellers in the first place, then negotiating with them for the prices, and all of this buying worth $8B would inflate the prices due to the very demand they themselves would create. And if collectibles keeps growing like it's expected to, that $8B just might not be enough.

Or... they could just buy the whole damn marketplace.

With eBay at their hands, GameStop doesn't have to go around searching for cards, rather the cards come to them. Not into GameStop, not into just any auction site, but into the biggest, most popular trading card auction site in the world.

Now I could write a full essay about the upsides of this, but let's keep it short and simple instead:

• Essentially zero effort in finding the cards.
• Not inflating prices as much due to not forcefully finding buyers.
• First dibs on everything.
• Near infinite inventory due to the number of people already selling on eBay.
• PSA partnership allows for cheaper grading.

Remember, this is all on top of what has already been stated publicly. If Power Packs truly are as great as Cohen says, then eBay will be the final nail in the coffin. This is his Phase 3, Ryan Cohen is going to buy all the cards.

As for me, I'm just buying the dip.