GameStop CEO Ryan Cohen Wants To Takeover And Transform eBay

0:00All right, Ryan, I thought a great place to start the conversation. Can you explain to me very simply, what is GameStop's business today? Everyone saw the meme stock craze, but you've actually turned this thing around financially. So what exactly is the business today? uh the business is 1600 u.s stores uh we've divested a lot of parts of the international money losing businesses it's a business that's a lot less reliant on hardware and software and we've leaned uh very heavily into collectibles trading cards and refurbished tech And then what is the latest financial metrics compared to when you first got involved?

0:42Because my understanding is the business was losing tons of money. Now, not so much. Yeah. When I joined the board, the company was losing hundreds of millions of dollars every single quarter. And the business today is profitable and is making a lot of money and is going to make a lot of money this year. and we've cut SG &A by 800 million. And we made close to$400 million last year and this year we'll do better than that. Okay. So what people thought, I think when you first stepped in was like you're going to be the meme stock king, but really it seems like you're now the turnaround king. You basically turn the business around.

1:27Yes. Okay. What's the balance sheet look like? Because you got a lot of assets. How the heck did you get billions of dollars on your balance sheet? We have approximately around$9 billion of cash. We did some convertible debt at a 0 % coupon. And the company has a strong balance sheet today. Okay. Of that$9 billion, you've got cash and you've got Bitcoin still? Yes. all right uh when you bought the bitcoin i think everyone's all excited because you're going to go and like put all the money in bitcoin but it seems like you bought a little bit and you're just kind of hanging there um you recently announced okay now you want to go buy ebay and i gotta admit uh when i first saw the very first wall street journal article that said that you were looking for a big target usually a big target is like pure sized you know if you're a 10 billion dollar a company you're looking for 10 billion maybe a 20 billion ebay is a 50 plus billion dollar company so this is like the ultimate elephant hunting why ebay like why is that so interesting to you it um it's within my circle of competence it's a business that i understand it's the second largest e-commerce asset in the united states uh and it's a business that is under earning and it's a business frankly where i can go in and i can make a really big impact in terms of the profitability in the short term but more important in the long term it's something where i want to run ebay i want to own ebay i want uh i want ebay to me but to be a much much larger business and it's a business I understand well based on my Chewy experience.

3:24Like physical retail is not within my circle of competence. E-commerce is my wheelhouse and there's no asset in my view that has as much potential as eBay. So there's a woman that I know who is a very well-known business journalist and she texted me when all this went on and she basically was like what are your thoughts so i got on the phone with her and uh one of my points to her which i am shocked people do not quite understand is like you've done this before you built a chewy's a 10 billion dollar company today give or take can you just give us like the two minutes on like what was chewy how you built it like you're not somebody who's just you know came out of nowhere somehow became the CEO of GameStop and are like trying to like throw spaghetti at the wall like you came from the e-commerce business and built a very, very successful e-commerce business.

4:18Yeah. Chewy, I started in 2011. I had a lot of trouble raising capital for a lot of different reasons. There was a lot of competitors in space. There was the comparison to pets.com. Everyone said it was impossible to have positive unit economics selling 30-pound bags of dog food or pet food and cat litter. um but we scaled very quickly it was all about scale and and market leadership and focusing on the the basic stuff the fast shipping having amazing customer service having the right products having amazing uh you know having a ui and ux that was very simple to go onto the website checkout very quickly.

5:08So in hindsight, it wasn't the best idea. It's a low margin business, but it's consumables and customers. It's a subscription business. Over 90 % of the company's revenues come from AutoShop. But we had really good execution. So we focused on doing the the simple things really well and building a household name. Now, when I look at you taking that experience and going to eBay, I think there's two things that stand out to me. One, people are positioning this as GameStop buying eBay, but really it's merging of them creating one single business made up of eBay and GameStop and putting you in as the CEO.

5:57So to some degree, this deal is people betting on you leading the business going forward versus the existing management team. And then the second thing is that everyone looks at GameStop and immediately it is the retail investor participation that everyone focuses on. eBay, from my understanding, is almost all institutional investors. A very large portion is institutional investors. So really the pitch here is like, you are pitching Ryan as CEO of the combined company to institutional investors, not to retail investors. Is that a fair way to think about this? Yeah, exactly. All right, what's your pitch to the institutions?

6:31Why should they support this? If I was the institutions, I would roll over 100 % of my equity. And I'm not saying, I don't say that as, we're offering to buy eBay at$125 a share. You can look at it as basically we're giving them a special dividend for half. And, you know, depending on when they bought, there's taxes with that. And then the other half, they're rolling into equity of the combined business that is going to be a lot more profitable because we're going to focus on efficiency in the short term and in the long term. And we're going to focus on revenue growth. And I don't get paid unless I build a much larger business.

7:21And I want to turn eBay into something much larger. So it's the difference between a professional management team and board of directors versus an owner operator at, you know, leading it that doesn't believe at all in work life balance. Now, you mentioned you want it to rival Amazon. You think you can do that? I say that in terms of not turning eBay into Amazon, not going head to head in, you know, in fast moving consumables or selling new electronics or or phone chargers or anything like that. I say that in terms of eBay's$50 billion business and it's under earning. And I think that us leaning into live commerce with category expansion, eBay is a household name.

8:31It is a very, very strong asset and it can be a much more valuable business. So I say that in terms of just the sheer scale of the business, there's, it can be something much larger than what it is today. So if I look, the share price is up 13 % in the last month, which given about 50 billion or so, you've created, you know, six,$7 billion of value for eBay shareholders by simply just making this announcement. Is that the way you look at it? Yeah. I mean, they're, you know, part of it. I think that's fair. you know the yeah that makes sense okay now uh you've been tweeting a lot um how much time you spent on twitter um how much time do i spend on twitter uh like an hour on a daily basis yeah i would say probably somewhere between 30 to 60 minutes daily okay uh some of these tweets It's very entertaining.

9:34So I like the fact that anyone can say anything, good or bad, and nothing gets taken down anymore. So it's good. Listen, you're talking to somebody who spends a lot more than 60 minutes on Twitter every day. So I agree with you. Some of the things that you've been tweeting are directly calling out both the management team and the board. And I think a lot of your commentary has basically been like, these people are just nurturing the business. They're not really growing it. They're not, you know, kind of leaning into innovation and driving what you think should be happening at the company. But then also you've been hammering them on board compensation, CEO compensation, management compensation.

10:21Just talk through, like, what are some of the absurd stories or insights and anecdotes that you've come across so far? Well, I mean, if you look at they they rejected our proposal this morning. And I mean, the general spirit was actually correct. They said that it wasn't attractive. And they're right. It's not attractive to the board and the management team because we would be getting rid of the board and the management team. And the board collected$4 million in board fees last year. The CEO is making close to$30 million annually. The CEO, by the way, has bought$0 of stock in the open market since he's been CEO for close to six years.

11:09So it's not attractive to them. It's very attractive to shareholders, but it's not attractive to them. And it's anticipated their reaction in terms of they're not owners, they're employees collecting a paycheck. So their exact words, I think, were your offer was not credible or attractive. Is this it? Is it over? Like, do you just go home now? Or what do you do? No, we'll see what happens in terms of next steps. But - What does that mean? I want the business. I want the business. And, you know, we own indirectly through our position since it's a derivative position. We own over 5%.

12:14And I want to own the business. I want to run the business. So how do you get around them tonight? Because it's very weird, right? For those that don't understand how this works, it's like you're basically bidding for a company and the people who are the first line of defense of making the yes decision, you're basically saying, if I get this business, you will not have a job here. So, of course, they're not very interested in saying yes. There are other avenues you could pursue. For example, you could proxy shareholders and you can kind of go around. You could go to institutional investors. What is the Ryan master plan as to how you end up getting eBay?

12:55At a high level, it is the owners of the business understanding that there's a lot more shareholder value to be created by me running the business. Um, and the existing board and management team is an impediment, um, because I mean, they want to keep their jobs. It's that, you know, it's, it's that simple, but it's, uh, it's the, it's the real owners of the business understanding, um, how much better running they can be. Is it fair to say that they're destroying value or they're just not creating value? uh i mean if you look at the performance let's say like since covid active users is down 30 million operating income is down operating expenses is up uh every important metric uh is down considerably So, you know, the company has bought back a lot of stock.

14:08There's no question about that. It's been a very significant buyback program. But, you know, spending$2.5 billion a year in sales and marketing and basically not growing active users is lighting money on fire. So whatever the expenses are today, how much do you think you can break it down percentage wise? Like you can cut 20 % of expenses, 50 %? I mean, it's a business that's spending over$5.5 billion on$11 billion in revenue to run a business that essentially has no inventory and is very asset light. So$2 billion in cost cuts. um i mean if you look at gamestop as a good example and i i've committed to 2 billion in cost cuts at ebay but if you look at gamestop as an example uh you know we've cut out sgna has been reduced by 47 and that was actually a business that it was very difficult to cut costs like there wasn't a lot of fat to cut at gamestop um it was already for the most part efficiently run and not a high margin business.

15:25eBay is basically like, I would say GameStop was in pretty good shape from an expense standpoint. It's just overall business with cyclical and the world was betting against it for very good reasons because of the move, obviously, to digital gaming from physical software. eBay needs to be on like Ozempic. It's literally obese and it needs to, it is extremely, extremely overweight to an unhealthy degree. Like it's about to have a heart attack. But luckily, the business has a very strong moat and it's able to carry that kind of weight. But it doesn't mean that it's healthy. When you look at the cost cutting you did at GameStop, how much of that is because of AI or other technologies versus just being a good operator?

16:30I mean, we're actually only starting to really leverage AI like in the past quarter. And so, you know, it was more just making the teams smaller. Like when I came in, basically every single major publicly traded SaaS company somehow GameStop had a long-term contract with and was spending millions of dollars. And so it's consolidating the technology stack. It's having smaller teams. It's going deep into marketing spend, looking at ROI. Basically, whatever everyone tells you internally is pretty much the opposite. because I mean, you can't like everyone is either reliant on the software is worried about their jobs, uh, is getting some kind of kickback.

17:25So you kind of have to take a grain of salt in terms of even the feedback you're getting internally. Um, but you know, I look at running GameStop as like, what would I do if I had one GameStop store? And if you have thousands of stores you run it with the same level of frugality as uh as a family business with with a handful of stores now do you use ai on like a day-to-day basis or do you use ai to pick ebay out of the thousands of businesses that you could have gone after i have always long admired ebay's business and

18:07I didn't want to be the CEO of GameStop. Actually, when I sold you, I didn't really want to do anything for the most part. And then I lasted like a few months and retirement wasn't for me. But I'm very eBay's business is, I mean That's your white whale. It's eBay. Yeah, it's the one. all right um what's your relationship like with uh roaring kitty you think you could get him involved and that would help your case uh i don't really have a relationship with uh the roaring kitty i i know really as much about him as the general public does another person who's been in the uh the game stop uh maybe a circle is a michael burry he seemed pretty uh uh supportive of uh you going elephant hunting but then there's rumors that he might have sold his position or something what's going on with bury well i would say like if i look what i like about both of them is their contrarian and we all basically went into game stop at like the same time and i think for a lot of the same reasons i can speak for myself in terms of like what did i like about the GameStop investment is at the time, everyone thought I was fucking nuts for investing in GameStop.

19:33And like a good proxy was the high short interest. Like it was over a hundred percent, but in general, there were a lot of reasons to hate GameStop from the real headwinds, uh, going against the business. Um, and so I, I respect contrarians. Like sometimes, um, it's, uh, I, I like that they're willing to, to take the other side, uh, of a trade and they're comfortable with, um, you know, they're, they're comfortable doing things that are unpopular. Makes, uh, makes sense. Um, all right, let's get back to how you win this thing. Like, how far are you willing to take this? Will you take it to a proxy vote?

20:22Will you go and actually get the shareholders to hold the management team accountable? We're going to, I don't want to call my shots because, you know, we're dealing with people that are making a lot of money and they're not owners in the business, but we're going to do whatever we obviously need to do in order to bring this proposal in front of the true owners of the business. Okay. Now, there's an infamous question at this point of how you gonna pay for it. You repeatedly have said half cash, half stock, which is a great meme, but how you gonna pay for the business? Everything now, and by the way, everything is half cash, half stock.

21:14I saw these memes. It was like a hooker and how are you going to get paid half cash, half stock. It was amazing, incredible. But no, what's funny is that the media did not understand the transaction. And I don't know, maybe they spent too much time in college or something like that. But basically, if you look at what we're proposing, so we have$9 billion of cash in our balance sheet. We have a commitment from our bankers for$20 billion of financing. And we offered the rest in stock. And so if you look at, essentially they're taking half off the table at$125 a share, which is a 46 premium to when GameStop started buying.

22:20And the other half, they're rolling into equity in a new business or a combination between GameStop and eBay that would be run by me. And so if it was all stock, we would own GameStop shareholders would own 20 % of the business. eBay would own 80 % of the earnings of that business. But they're cashing out essentially what we're proposing is half and the other half they're rolling. So they would be owning roughly around 40%. And then obviously everyone's saying, well, there's going to be a lot of dilution. And yeah, there is dilution. But the dilution is accretive to both GameStop and eBay shareholders because we're going to be doubling the earnings power of the business.

23:14eBay's business and GameStop's business is going to continue growing. So it's EPS accretive to both GameStop and eBay shareholders. and eBay shareholders continue to own the majority of a business that their earnings are coming from eBay, except it's run by someone, frankly, that gives a shit. Like that's the big difference is I give a shit and I'm going to do whatever it's going to take. So we're proposing 50-50. If I was an eBay shareholder, I would want to roll all of the equity over, but we'll see what happens. You started selling some stuff on eBay, almost like doing a little product investigation, and then I saw that they suspended you?

24:03Yes, they suspended me, and then I got a permanent suspension. Then my account was still online, and then now I have limits on my account, so I cannot sell anything. I was going towards financing the deal.

24:24Why do you think they did that? I have no idea. There's all kinds of... When you talk to sellers on the platform, they'll tell you there's all kinds of arbitrary limits on the platform, things that are done to prevent fraud, even though I've personally experienced all kinds of fraud on the platform. So in general, I just say at the top, whether eBay ends up being a$50 billion or$200 billion business, their compensation for the most part is risk-free and they're not invested. So you wrote back in February this now famous Twitter post. You said, the hollow men, American capitalism is rotting from head down.

25:22We've replaced the owner operator, the risk taker, with a new parasitic class of corporate bureaucrat. You call him the risk-free insider. And then later in the piece, you say, these are the hollow men of the boardroom. They are masters of PowerPoint. They wear the right suits. They say the right buzzwords about governance and ESG, but they are mercenaries fighting a war with someone else's ammunition. I take it that you wrote that as you're the exact opposite. And what you're saying is eBay doesn't need mercenaries. They need a missionary to lead the business. Yeah, that's exactly that. All right.

25:54And so it's going to come down to the institutional investors, whether they believe that or not. Yeah, it's going to come down to the owners of the business and who they believe are the best fiduciaries of their capital. Are you going to take less compensation than$30 million a year if you become the CEO? I have not taken a penny out of GameStop. up uh and I didn't take a penny out of Chewy so I don't I don't deserve anything if the business doesn't perform it's that simple like it's uh I shouldn't get paid if I don't deliver results taking it a step further um I believe that you have an assistant and maybe uh some other folks who work with you but you're paying them personally rather than the company yeah exactly I mean, could you imagine somebody at eBay doing that?

26:56No. I mean, they're, and it's funny, they, like, they basically tried to put something out saying that my, I guess maybe they didn't have all of the facts, but, uh, I mean, it, within corporate America, the executives have assistants handle their personal lives and it's considered a benefit. it. And, um, uh, it's just not something that like, I just, I don't cross that line and, um, whatever my personal expenses are, they're my personal expensive. So I schedule my own meetings and I pay for all my personal expenses myself. Makes a, makes sense. I also schedule all my own meetings. I think we coordinated this by just texting each other like normal human beings rather than...

27:48All right. What else do you want people to know? Anything else that you think is important here as you go on your crusade? By the way, I've been very clear. I think you're going to win this. I think that this is a fairly lopsided battle. I think that they're in a very precarious situation where the management team cannot engage you in a way that they need to to fight off any sort of adversarial bid because that will bring them down a couple notches. And one, they think that's beneath them most likely. But two, on a level playing field, you run circles around them. Two, I think it's very compelling to institutional investors to say, hey, I'm not gonna pay myself unless I perform.

28:32I'm a missionary, they're mercenaries. They're basically siphoning capital out of the business. And then the third thing is the market's pretty smart, man. and you announced this and eBay share price is up. Obviously, someone somewhere thinks that this is a good idea. And I think that, you know, you probably have used eBay as a seller more in the last 30 days than the entire management team in the last couple of years, I would assume. Yeah, totally. And I mean, it would be great. I asked Jamie for a one-on-one meeting And I basically said I'll be in San Jose at any point or meet at anywhere they're interested in.

29:15So if you can get them on the show, maybe that would be the best way for us to all meet together. I mean, listen, I think - Just hammer this out. Yeah, why don't we just - Who should be running this business long term? Well, you guys could come on. You could debate strategy. I actually, what I really think you should do is I think you should go set up a table outside of their office and just wait and just live stream it. Just wait for him. Okay. And he won't come. I like that. And, you know, they'll probably ask you to leave, but it'll become pretty obvious that, you know, who's focused on doing this or not.

29:53like the other thing too the other thing is uh i would love i mean maybe somebody at ebay has uh like what are these people doing all day what's on their calendar they're on sabbaticals they go on long vacations they check their email once a day they don't uh i think they believe in that whole work-life balance thing i think there's probably people inside of ebay who are sympathetic to your cause, it'd be a shame if all of a sudden they started helping by telling you. I saw somebody was tweeting at you saying that in the San Jose campus from 3 to 6 p.m. every weekday, there's free beer and wine.

30:30Yeah, that's healthy. That's good for a company to be supporting that kind of behavior. 3 p.m. I mean. Yeah. Why not? Yeah. If you start at 3, why not start at 10 a.m.? Just, you know. Exactly. exactly exactly uh do you want to send it anybody anywhere uh to get more information you kept mentioning half stock uh half cash check the website what's the website you want people to go to five i mean they should go to gamestop.com and they should buy some stuff they should buy some trading cards from us all right bill pulte by the way he says hello he says that uh he's he's cheering for you. Bill is a good man.

31:16Yeah. He's a good guy. All right. All right, Ryan. I appreciate it. We'll do it again. I'm going to, we're just going to do a little check-in every couple of days because, you know, it seems like they're going to keep tripping over their own feet. So we could do like the best of the week highlights or something here as you continue this. Let's do it. You know where to find me. All right. Talk soon.