FULL INTERVIEW: GameStop’s Ryan Cohen on Why He’s Buying eBay

Ryan Cohen, welcome to the show. Thank you so much for taking the time. How are you doing? How are you guys? >> Great to see you. >> Uh I would love an update. What can you share with us on the situation as things have developed since yesterday? Just to sort of uh set the Obviously, this is moving very quickly. Where are we right now? What's happening? Uh we made an offer yesterday. Um 125 bucks a share. Um Half cash, half stock. >> >> That was funny, wasn't it? Have you considered 49% cash? Is Why did you get to half cash, half stock? Can you unpack that a little bit at least? Well, I mean, frankly, when you think about me going and running the eBay business, what we're proposing is for existing shareholders to take uh half of their investment off the table, and that would be us providing them with 28 uh with 28 billion dollars, which is like a 40% premium from when we started buying the stock. Uh and then they would be getting roughly uh I mean, it depends on ultimately when the transaction closes, but they would be rolling the rest into the combined company of GameStop and eBay. Frankly, with me running eBay, I think that the company the earnings power of the company is going to increase substantially, uh as well as the ability to to grow. The platform stagnated over the last decade, and uh I could do a lot with eBay. I love it. >> That's a very strong business, and that's right up my alley. Take us through the big vision. Like in 5 years, you're at the helm. Like how big can this business be? Are you expanding it? Obviously, there's an operational efficiency point, but what is the big picture? What's the blue sky, pie in the sky vision for the combined entity? So, where we've had success at GameStop and where eBay has had success is in collectibles, trading cards, uh collectibles. The The founder of your show was uh was talking about his Montblanc pen and like that's a good example. That's a a perfect item to go and buy on eBay, but you're always concerned uh that is it going to be real and the trust. And that's something that using GameStop's 1,600 stores, we can immediately authenticate that item. The seller can ship it or we can ship it, but we've got 1,600 access points that we can do live authentication. So, we can go deep in collectibles leveraging our physical infrastructure. Sure, we can increase uh intake by bringing a lot more product onto the platform. And then there's a lot of other categories that I can I can grow in and uh you know, you look at live commerce as an example. I mean, eBay has 130 million users and they're getting crushed by competitors in live commerce. So, uh an owner's mentality, you know, I can uh I want to own I want to own eBay forever. Like I I love that business. It's run like a public utility. It should have been wiped out, but it hasn't been. That's why I love it. >> remarkably resilient. How many How many companies How many startups have gone after a specific category on eBay, raised a hundred million plus dollars, and yet eBay has remained resilient? It It shows that that there's um you You it's a it's a it's a really powerful platform. Yeah. That's why I love it. And you know, the website still looks the same as it did in 1995, but everyone's tried to kill this thing, and it's still making over $2 billion a year. Yeah. So, that goes to show you the the durability of the business. Talk about live commerce more. Would that be just a better integration with TikTok, Instagram streaming, Twitch streaming? Do you need to go and partner with big creators? Do you need to find your own platform for that? Like, how does that actually play out in a world where eBay and you are making a bigger push into live commerce? It makes a lot of sense, but I'm wondering like, how does it actually work? Yeah, it would it would be partnering with creators. I mean, they've got the platform. We would improve the platform so it looks better and more consistent with the kind of UI that you have at at competitors, but there's the user base, and so it's not something you have to market. It's building out better tech and partnering with creators. >> Yeah, and and the correct incentive structure for those creators because I bet you right now, you could probably go get some referral code or something, but it's not deeply integrated in a way that you can really accelerate on a social platform. Uh why do you think eBay has eBay been been a target of any type of um deal like this in the past? I'm I'm I'm not familiar with any off the top of my head, but why do you think maybe uh it hasn't been more more of a target? Uh and and I guess like why why do you think you can get more efficiency out of it than maybe some other potential buyers who I'm sure see see their costs, you know, marketing is something that uh people gravitate towards, um but I'm sure you're seeing other efficiencies as well. So, in terms of the competitive landscape on an acquisition, I think there was uh some people circling around a few years ago. Nothing happened. But the strategics can't really do it cuz I don't think that they would be able to clear antitrust. So uh any of the large competitors wouldn't be able to acquire it. Um and uh you know, I don't think that we would have any regulatory issues uh getting clearance on on a on a merger. Uh in terms of the efficiencies GameStop is a good example. Like GameStop is a dog and it could have been dead. >> >> And we've we've life we've breathed a lot of life into this thing. >> >> Right? And you know, you look at SG&A we've pulled out we've dropped SG&A by 47% $800 by making marketing more efficient, almost turning off marketing. I mean, everyone knows GameStop. Everybody knows eBay. So you talk to the marketing people they tell you like it's going to tank revenues and all of this and the reality is uh most of that marketing spends isn't making money, but everyone's trying to protect their jobs and there's kickbacks, there's all kinds of perverse incentives. And so I'm running the business like a family business. You know, it's it's really not that complicated and you look at eBay spending two and a half billion bucks to grow 1 million users 2 billion in cost cuts between sales and marketing and corporate overhead. It's not a lot. Uh and it's not something that's going to take a few years. Like it's something that is going to happen fast fast fast because I'm putting leverage on this thing and I don't want to run a leveraged business. So I'm not going to run it hot. I'm going to pay down the leverage and I'm going to increase earnings. Uh Uh They're spending five and a half billion dollars on operating expenses on a 11 billion dollar business that has no inventory and it's asset light. So, it just There's 11 and a half thousand employees and it doesn't make sense. It doesn't You don't need a I could run that business I could run that business from my house. Like it's It's eBay. It looked the same as it did in 1995. They need 11 and a half thousand >> is is the Elon Twitter take private somewhat of an inspiration here? There's been a number after that happened. In many ways the business suffered, but maybe it wasn't because of the deep cuts that he did to to the team and >> kept working. >> Yeah, the service kept working. It's still a great product. Uh I We've been surprised that more CEOs and management teams haven't done something like that with businesses that are household names, but somewhat stagnated. Uh is that an inspiration at all? Yeah, and Twitter is a good example. I mean, what really happened at Twitter was that the advertisers are Yeah, I don't know what the situation is now, but they pretty much conspired against him and you know, it had nothing to do My understanding is it really had nothing to do with the cost cuts. More of just the advertisers conspiring against them because of the the mandated political landscape and the fact that people apparently are against freedom of speech. And so, like you look at the usability of the platform and the teams the engineering teams are much smaller and they're innovating a lot faster. So, it's actually the opposite. The more people you add, the more you slow things down. And the fewer people you have have the more It's like a startup. You've got to always be in startup mode and you build a big teams and nothing gets done anymore. Uh do you think LLM's will be a tailwind for eBay over the next decade? It feels like for the long tail of commerce, you're trying to find really specific items. It feels like LLM's and people doing research in these products could be uh catalyst for the business. Maybe there's things on eBay that would be tough to to find, but if I'm really getting precise around prompting or running these sort of uh agentic uh searches, uh maybe maybe I have a higher likelihood of purchasing something. Yeah, I mean I think about all of the things that can disrupt the business in the future and uh you know, I think that eBay is the kind of business where the the future of the business model is more certain than most tech businesses and that's why it's done so well and you know, there's been such a lack of innovation, yet it hasn't been able to be disrupted. So, I would expect that uh to continue to to be the case. If it doesn't materialize as an M&A, are you looking at a board seat? You have a position. Will you be more active in a non-M&A scenario? Yeah, I mean I'm going to I'm going to do whatever we need to do to protect our investment and uh to improve the business, but the the goal here isn't to be an activist. The goal is I want to own eBay. I want to run eBay. Like I want that to be my baby. I want to build something much larger and cost-cutting frankly is the way to make the business more efficient, to pay down the debt and innovate, but you know, when I think about what I can do with eBay in the future, like look at Chewy. You And now that eBay is like Chewy on steroids. And so um there's so much more runway and it's global. Yeah. I mean it seems like a huge opportunity. How do you want to be comped? Based on performance 100%. Is there any tension between you and the shareholders? How do you actually create alignment there? It would be my current compensation plan is tied to really lofty metrics and it's based on the the first tranche I've got to double market cap as an example just to hit the first tranche and the 10x it in order for it to fully vest. So That seems pretty low. >> I'm not interested in Yeah, I I haven't taken uh a dollar of salary or any bonuses. And you know, it's funny actually. I just got a call from my team today that said this is how I know they hate me. They're not happy about this by the way. >> >> The GameStop This is the GameStop team. eBay No, eBay is not happy. >> eBay team, okay. Yeah, and after this interview they're they're really not going to like me. Why? Cuz they're going to find out I'm cutting marketing spend and the board already doesn't like me cuz I'm calling out all the board fees. Yeah. But I get a call and they say, "There's a There's a They're calling out your personal assistant." I said, "What are you talking about?" And they said, "They went on your the GameStop's career page and they saw that there's a listing for the personal assistant and it's all kinds of personal stuff and that's basically a a CEO benefit and you know, it's basically not part You're using company resources personally." Mhm. Mhm. I pay for my personal assistant personally. I don't even pay for my the company doesn't pay for my personal assistant. So they're already starting to get um they're they're doing whatever they can uh They want to fight for their jobs. >> had has any major eBay shareholders reached out to you? Have you had you know what what is the general sentiment? You know, how do you think what do you think it'll look like if you take this uh directly to the shareholders? I don't know. I mean, I would want to I want to own eBay at $125 a share. We're proposing there's tax advantages to rolling it, but when I think about what eBay could be worth if I'm running this business, I believe it's a heck of a lot more than $125 a share. And so uh I I would roll 100% of the of the equity, but you know, we'll we'll see. We'll uh we'll see what happens. Yeah. Uh what do you think of Michael Burry's critiques? Uh a lot of people were you know, talking about him exiting yesterday. He doesn't believe. Have you guys chatted? I haven't chatted with Michael in a long time. I've seen he's more active than he says uh his investing philosophy. So, I I figured the you know, his risk appetite um and you know, the leverage we're putting on just it it didn't make sense for him, but it seemed as though it was more of uh a trade more so than than anything. Yeah, looking at the price action yesterday, is that reflective of sort of like a shakeout of non-believers and you feel like you have uh the right people around the table now? I am when I think back to Chewy, every single day was a shakeout >> >> So, I Yeah, so um I don't know. It's hard to to diagnose the shareholder base and I'm I'm focused on what I could build over a long period of time and Yeah. if I got my hands on eBay, I can build something worth a lot and much larger than it is. So >> Was Paramount at all an inspiration? >> to ask. I've looked at it. Um Uh you know, what they did is really interesting, too. Just because a smaller company buying a much larger company, but the deal still went through. The capital was was marshaled. Uh that was something that I think was unclear yesterday for some people was you know, half cash, half stock. Where's it coming from? It How much of this is just an ongoing conversation and as you work through this process, you'll engage with other you know, pools of capital or financiers to to actually put together the final package. Do you have a date that you want this to like be done by? Um I mean, we have the cash I mean, we have the cash accounted for Mhm. today in terms of a highly confident letter from our bank for the 20 billion plus we've got 9 billion of cash. So >> Okay. >> >> Uh and the rest would be them rolling the equity into the combined company. Sure. Yeah, I think that was the that was the the the rolling of the equity was the thing that if it had got into the viral clip from CNBC yesterday would have made a lot more sense. So I'm glad we're I'm glad we're getting it in now. Yep. Is there I guess uh how much of your critique of eBay is specifically around the current management team? They've done a decent job. It's Look, it's anyone when you've got perverse financial and they're they're not operating like owner. Uh just you know, when when you've got it it all on the line, you're going to do whatever it's going to take. Many hour days, 7 days a week, you're not going to stop. And when when equity is given out to you like candy, I mean it's it's it's all company. So, you know, you the directors or the directors make $4 million. Like 350 to 450,000 per director. There's been no insider buying at the company. I mean, like it it's not a surprise. They're not going to light the money on fire. They're not going to light the world on fire. Like you've got a bunch of professionals in the board and a professional management. Yeah. So. If this deal goes through, roughly what percentage of your personal net worth will be tied to it? Well, um I I haven't done the math, but if things go correctly, then it better be the majority. Otherwise, I'm wasting my time. Yeah. What was your first memory using eBay? Mhm. Were you a power seller back in the day? Very good question. I I bought and sold DJ equipment on eBay back in like 2003. It was amazing. I don't remember my first transaction, but uh I'm going to have to get back to you on that one. Okay. With GameStop, last time we talked you were mentioning a little bit of an expansion into digital goods, less physical material and and and and stuff. Like do you think that there's an opportunity for eBay to play in a digital marketplace or in a world where certain collectibles or certain goods become digital or or the market shifts towards more digital goods. And and would you like to see eBay expand into that? Yes and yes. In terms of a digital marketplace and they're already doing it to a certain extent. I mean, like all kinds of Roblox digital items are bought and sold, but uh and I've actually bought them for my kids, and there's so much fraud on the platform. Like we're buying stuff, it's not a real item, end up having to do a chargeback, but then it ended up getting delivered, so you can't do a chargeback. So, like they've got the basics of it, but it's not being done well. So, like digital gaming, totally. That's a huge opportunity to to dig into. Um There's so much potential. On on uh digital stuff, I guess. Um You're obviously interested in cutting costs. Are you optimistic that stablecoins might be a path to reducing costs? It's a high-volume transaction business. Obviously, a lot of credit card fees. Maybe there's a way around that with stablecoins. We hear that from a lot of stablecoin founders. Haven't heard it from as many operators. What do you think? I don't have a point of view on that. Um I haven't looked into it, so I think the sellers would would probably be eating the the the cost, but but um potential option. Yeah. I don't know. Jordi? Uh do you have any sense of how eBay is using AI internally today? Have they have they spoken about it much? Do you do you believe they're getting very much leverage out of the models? Do you think there there could be quite a bit more? I've seen that they've made uh listings easier in terms of just generating product descriptions and stuff like that. So, I think they're kind of like doing the super easy stuff. Um still there's a lot of friction to sell a product on eBay. Like it's uh it just it's not easy. So, the benefit of our 1,600 stores is we have the ability to increase intake, but I would go through it and I would make it as simple as possible to have a real item for sale as a seller. Mhm. And there is a it's there's a lot of steps. It's just it's a pain in the ass. It's too difficult. Yeah. 1,600 stores in the world where you combined eBay and GameStop, do you expect that number to increase, decrease, stay the same? Uh it's a good question. I mean, our footprint is a moving target. We have It was part of what appealed to me originally when I went into GameStop was the leases were short-term. So, they're like 2 to 3-year leases, and as we see how the business performs, you know, we decide whether or not it makes sense to renew the store. So, I mean, it's it it's going to be dependent on the utility of the store. It's like if there's traffic and if profitability is increasing, we'll keep the stores open and if it's not the case, then we'll shrink the the store base. Okay. Uh couple other scenarios. In a world where an M&A doesn't happen, is there a business partnership to be done where verification of rare collectibles can happen at GameStop physical retail stores for a price and eBay is paying GameStop for that service? Is that something you've explored? Is that something that's at all likely to happen? Well, that would So, yes, and it would basically take $0 in CapEx in order to something like that and it's a good idea. Um I hope that doesn't want to that doesn't happen cuz I want to I want to run the entire thing, but if it doesn't, then there I mean there's there's a partnership option. I reached out to eBay like, I don't know, maybe a year or 2 years ago to talk to them about partnering and they didn't engage seriously. Like everyone that everyone's on vacation. Everyone's always on vacation. Like they're not available. They have assistants. I'll get back to you next week and it's like, let's go. Let's get it done now. So, then they never get back to you, then you're following up. It's like there's there's there's no sense of urgency at at that company. There's no sense of urgency frankly at at most companies. So, it never gained any traction. Okay. Etsy is trading at 6 billion. Is that a target if the eBay plan doesn't come together? No collectibles action there. It was in the chat. I got to ask. Um eBay's just such a natural fit for the the collectibles, leveraging our storefront footprint, but then also like my ability to cut costs and build something much larger at the company. So, every everything else is if it doesn't work out, like I can find something else, but um I I like eBay. It brings me back to my roots. Uh what's something that eBay is not doing today that you think they could expand into or is that even the right question? Do you think the core business is just so great and they're so dominant in in many of these categories that you just want to pour fuel on the fire? Live commerce. Yeah. But to me to me that's an extension, right? Cuz they have a lot of inventory, it's just a new selling channel. Yeah. Yeah, but I mean in terms of doing that well, accelerating revenue growth, um you know, I I think that that is that's big. And so going much deeper into collectibles in luxury, trading cards, there's there's a lot of runway there. Do you have a position on international capital providers? A lot of these big deals, uh the you know, maybe they start at 50 at half cash half stock, they wind up being more leaning cash. That's what we saw with the Paramount uh Warner Brothers deal. Uh are you interested in talking to international sovereign wealth funds, that type of capital provider? We're um we're looking at a a variety of of different options currently. Mhm. Makes sense. Uh mutual friend of the of the show and uh GameStop mod retro, they've been pretty aggressively pushing into this retro gaming category. How do you see that uh growing? Our team at the office recently got it gotten old Xbox 360, fired it up. I can see retro gaming just getting more and more popular, but what's your view on the category right now and where do you think it's going? Uh we are we've uh we have the the return rates are kind of high, but we're we're building out the retro business in our stores currently. So, that's uh that's a it's a it's it's still small, but it's a growing category for us. Mhm. Uh what do you want to see the rest of this week? How do you how do you uh how do you see it playing out? Uh uh I don't know. It's a question. Ball's in their Ball's in their court. Pretty much. Yeah. Ball's in their court. Yeah. Well, we'll let you get to it. I'm sure you have more calls. Thanks for jumping on. You're welcome to join anytime. Let's do it again as as the story progresses, but we're enjoying following along. And if anybody out there wants more information, it's on the website. Yeah. It's on the website. If anybody asks you how he's paying for it, just tell them half cash, half stock. You got the beginning and the end of the interview. Thank you so much for coming on the show. >> Great to see you, Ryan. Have a great rest of the week. Good luck out there. Goodbye.