Why GameStop’s bid for eBay echoes one of the worst business deals of all time

By the start of 2000, I was already a veteran writer for Fortune warning our readers that the dot.com craze had lifted Nasdaq valuations to unsustainable highs. All of the time-honored metrics pointed to the same outcome—crash ahead! Then, AOL and Time Warner, Fortune‘s parent as owner of magazine-maker Time Inc., issued a shocker for the ages that, as it turned out, confirmed my worst fears: The tiny internet hotshot, its brand barely a decade old, was purchasing the fabled media colossus multiple times its size. For the announcement at Time Warner’s Manhattan headquarters, the media empire’s CEO Jerry Levin, appearing sans tie or jacket, took the stage alongside AOL chief Steve Case, and avowed his delight at taking Case’s offer since “I accept dot.com valuations.”

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Today, that transaction is generally cited as epitomizing arguably the craziest interlude in the annals of U.S. equity markets, and vilified as the worst big deal ever. So bad that no transaction based on similar terms, where minnow swallows the whale for a king’s ransom, could happen again, or even be floated, right? Not so. When this journalist saw GameStop’s bid to purchase eBay on Sunday, May 3, I instantly thought of all the offer’s parallels to AOL-Time Warner. Most of all, the buyers’ motives match in that both are now (in GameStop’s case relatively) riding high, but face dim prospects ahead. Their solution: Using their inflated stock to land a sound money-maker that via the combo, will retain a lot more value for their shareholders than going it alone, and promising moonshot synergies to sell the deal. Predictably, GameStop’s claims for the tie-up’s benefits echo the fantasy forecasts for AOL-Time Warner.

Hence, it’s worth examining how the GameStop-eBay math resembles the AOL-Time Warner numbers. And how fundamentals like those for the both the 2000 wonder and its 2026 cousin, promise to doom any union from the start.

GameStop would pay a giant premium for a high-flying stock, and multiply its share count to clinch a deal

GameStop offered $55.5 billion, or $125 a share for eBay; the video game and collectibles purveyor’s CEO, Ryan Cohen, stated that the deal provides for half cash and half stock. GameStop had already secretly bought 5% of eBay shares before the announcement, starting on February 4th. Measured from that date, it’s offering a towering premium of 46%. Those purchases likely contributed to a recent spike in eBay stock. At the close on Friday, May, 1, the last day of trading before the news broke, GameStop stood at $104, just off its all-time high reached a week earlier, following a gain of around 20% so far this year.

It’s unlikely, however, that eBay would agree to this initial overture of $55.5 billion. Michael Burry, the famed hedge fund manager and hero of The Big Short book and film, bases his predictions on a follow-up bid of $65 billion, and found that scenario so terrifying that he sold all his GameStop holdings. So I’ll go with the higher, more probable figure. At $65 billion, GameStop would be paying $131 a share. That’s a 26% premium versus eBay’s pre-announcement price, and 70% over where the internet marketplace was selling when GameStop started accumulating its 5% holding. As we’ll see, this is an epic, AOL-Time Warner-style markup.

Put simply, GameStop would be paying a huge premium on an already sizzling stock selling at pricey PE of 24 before the offer. But here’s the primary problem: GameStop’s market cap, pre-bid, was just $11.9 billion, one fourth of eBay’s $46.2 billion valuation. As a result of that mismatch, the buyer must issue an enormous slug of new stock to score. The equity portion would come to $37.5 billion (half our $65 billion purchase price). Raising that much would require selling an incredible 1.42 billion new shares at GameStop’s pre-deal price of $26.5. Today, GameStop has 448 million shares outstanding. That count would swell to 1.87 billion, multiplying the current total over four-fold or 300%-plus. We’re talking fearsome, seldom-explored dilution territory.

In reality, eBay is “buying” GameStop. Its shareholders would own 60% of the stock if a deal closes. Cohen would be the tie-up’s CEO.

That’s just the stock part. GameStop’s pledging to fund the rest, in our formula the remaining $37.5 billion, via fresh borrowings. Cohen says that he’s secured a commitment from TD Securities for $20 billion in loans. As of January 31, the close of its 2026 fiscal year, GameStop held $9 billion in cash. Assuming it puts that total into the transaction, GameStop would need to borrow the difference of $28.5 billion, comprising TD’s $20 billion plus an additional $8.5 billion from TD or other lenders. What interest rate would GameStop pay? It hasn’t disclosed the TD terms, but we’re looking at a pretty high-risk credit. Still, we’ll take the optimistic view that GameStop secures a highly-favorable number, say 6.0%. That puts its additional annual interest expense, after-tax,