GameStop’s wild bid for eBay

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0:17Good morning from the Financial Times. Today is Friday, May 8th, and this is your FT News Briefing. Big tech is on a massive spending spree and investors are dumping Indian assets. Plus, can GameStop close a wild deal for eBay? The test here is like whether a meme stock king can actually pull off the first meme M &A deal in history. I'm Mark Filippino and here's the news you need to start your day.

0:58Big tech companies are burning through cash to invest in AI infrastructure. Amazon is expected to spend more than it makes this year. Meta and Microsoft will likely also dip into the red later on in 2026. These three companies and Alphabet are hyper-focused on AI right now, and they could hit their lowest yearly free cash flow levels in more than a decade. That's according to forecasters. Back in 2014, though, their collective revenues were about seven times smaller. Tech companies have transformed into some of the biggest investors in AI infrastructure, but the spending spree means their resources are strained.

1:34And analysts say those investments will only start to pay off next year as the AI boom brings in more revenue.

1:46Foreign investors are ditching Indian assets at a record pace. That's because the Iran war is driving energy costs up and the value of India's currency down. The rupee has been hitting historic lows since the conflict began at the end of February. Investors have responded by pulling out$22 billion from India. Krishna Kaushik is our Mumbai correspondent. He's here to give us a sense of how all this is looking on the ground. Hi, Krishna. Hi, Mark. So how bad is this energy price surge for India's markets? Yeah, the problem is that while, of course, India's economy last year was in a soft spot, it was trying to recover.

2:23This year, the starting of this year, Indian economy was looking like, you know, it's going to boom this year. And then the war hit. And India, which relies on 90 % of its energy needs on imports, nearly half of the crude oil comes from the Middle East, and that's been completely disrupted. So what has happened is this has put pressure on the rupee, which was already a pretty badly performing currency in this region. And there's a very limited dollar supply. and as India has to go and scour for oil, which is costlier compared to what it was buying before the war started. So it is spending a lot more dollars on buying the same amount of fuel.

2:55So the rupee has drastically been falling to new lows, even though the central bank has intervened to try and pluck that. But the pressures are mounting. And you mentioned that the rupee wasn't doing so hot before this either. Why was that the case? The problem is India's ballooning trade deficit. And a primary reason for that last year was India's trade dispute with the US. US President Donald Trump raised the tariffs on Indian goods to 50 % last August because he blamed India of funding Russia's war in Ukraine because India was buying so much of Russian oil. Along with that, the net foreign direct investment in India has been nearly zero.

3:31And that's because while the inflows have not really stopped, the outflows have grown because the companies, international investors, have been repatriating their profits. And many Indian companies are also investing in companies outside the country. Another reason why foreign investors are not particularly keen on the Indian stock market right now, because India has no AI play at the moment. And that's where a lot of the international investment is going in. India is completely lacking in that. So with zero, almost net zero FDI and a ballooning trade deficit, the rupee was already under quite heavy pressure.

4:01How much is this all impacting India's economy more broadly? And is this affecting folks on a day-to-day basis? So interestingly, Indian economy has not suffered on a day-to-day basis. And that's because of two primary reasons over here. While the fuel costs have gone up in terms of India's import bill, the government, which controls the fuel prices in this country, has not raised the fuel prices for either diesel or petrol yet. They have absorbed most of the cost. That can change, of course. I mean, if the pressures remain high, at some point, it will be passed down to the Indian consumers. But at the moment, they have been protected.

4:34Secondly, another important thing to understand about Indian economy is it's still a largely very domestically oriented economy. So even though, of course, you know, the trade deficit has gone up, all that impact, the government is suffering at the moment. That suffering has not been passed down to the consumers as of now. Krishnan Kaushik is the FT's Mumbai correspondent. Thanks, Krishnan. Great. Thanks a lot, Mark.

5:00Remember a few years ago when an army of retail investors would back a company based on vibes and in doing so drive up its value? Well, Ryan Cohen made billions during that time. Now he's the chief executive of the OG meme stock company GameStop, and he has set his sights on his next project. He wants to buy one of the world's biggest online marketplaces, eBay. James Fontanella-Kahn is DFT's U.S. finance editor, and he joins me now to discuss. Hi, James. Hi, Mark. So before we get into this bid for eBay, tell me a little bit more about this meme stock king, Ryan Cohen. He's not your usual entrepreneur.

5:37He appeals to that kind of anti-establishment kind of investor. And I think the test here is like whether a meme stock king can actually pull off the first meme M &A deal in history. You know, it's not a crazy idea. And he has a good track record. He's not only been the chairman of GameStop. He created out of scratch a company called Chewy, which kind of is known for its pet supplies. and he built that out of nowhere and went on to become a publicly listed company for$9 billion. So he's not like a random entrepreneur. He knows what he's doing and he thinks he could do it at eBay. So James, this is an interesting one because eBay is worth$47 billion and GameStop is worth$11 billion.

6:24So eBay is worth more than four times GameStop. What do we know about this deal? Well, it's a$56 billion deal, a very unsolicited$56 billion deal. If you believe what Cohen says, he sees the opportunity to create a rival to Amazon, the e-commerce giant. He sees the combination of GameStop's kind of retail business with eBay's e-commerce business as one that is highly complimentary. And he thinks he can turn it into a$100 billion company. Well, I think the thing that stuck out to me is that he hasn't exactly been giving a lot of detail publicly. For example, this interview that he gave to CNBC the other day.

7:02I'm just trying to understand where the rest of the money would come from. It's half cash, half stock. I hear you. I'm just saying that that math doesn't get you to the price that you're offering. That's a pretty straightforward question. I don't get it. Where's the rest of the money coming from? I don't understand your question. We're offering half cash, half stock, and we have the ability to issue stock in order to get the deal done. How would he pull off this deal? It seems like he's being purposefully opaque here. I mean, that was some great TV. And he's instantly become a meme on social media.

7:40So the math does add up. The way he'd do it is half cash, as he says quite clearly. And the cash portion is fairly straightforward. He's got about$9 billion on GameStop's balance sheet, which is kind of insane for a company of that size. And then he's taking on another$20 billion from TD Bank. So that's the cash portion, easy. And then, as you mentioned earlier, GameStop is worth about$11 billion in equity. So you'd be still missing about$15 to$16 billion. He plans to do that by issuing new stock. And so that is really something that will depend on the appetite of investors of taking that new issuance.

8:20So that's where a lot of question marks are coming in. The mats can add up. It's a question of whether he will manage to do so or not. What do you think is going to happen next? Do we know what eBay is thinking about the deal? The vibes that we've got from the eBay camp are not warm. Let's put it that way. I'd expect them to reject this bid. It's not been confirmed yet. Partly because Cohen and GameStop have not really even tried to reach out to eBay. So this kind of came out of nowhere. and partly because he's already prepared for a fight. So we're likely to see Cohen going directly to eBay shareholders for a proxy fight.

8:57That could mean try to remove the whole board and get his own people in there, which would then allow him to kind of approve the deal that way. So it's still early days, but in terms of what Cohen seems to be intending to do is make this a really public, unfriendly battle. James Fontanella-Con is the FT's U.S. finance editor. Thanks as always, James. Thank you, Mark.

9:25Next week is a big one for diplomacy. On Thursday, U.S. President Donald Trump will begin a two-day visit to Beijing. It's a trip that includes a summit with Chinese President Xi Jinping. Here to chat more about what we can expect from that meeting is Victoria Craig. She's the host of the Monday edition of the News Briefing. Hi, Victoria. Hey, Mark. So how much is riding on this meeting? Well, there's certainly a lot of focus on it. And there's a couple of reasons why it's being so closely watched. The first is that this is a rescheduled meeting. So if you remember back in March, President Trump asked to postpone.

9:58And at an Oval Office gaggle with reporters, he said the reason very plainly for the delay was, quote, very simple. I've got a war going on. And this conflict, remember, was only about two weeks old then. And Trump and the world, frankly, was really dealing with the fallout of all of that, including the closure of the Strait of Hormuz. which, as we've been talking about, about a fifth of the world's oil and gas supplies flowed through pre-war. So a big deal. And that sort of leads into the second reason why we're all focused on this meeting, and that's because China, before the war, bought most of the oil that Iran produces.

10:30So China itself has not been unaffected by this conflict. Yeah, and it's even gotten involved to a certain extent in trying to broker diplomacy. How has this affected relations between the U.S. and China? Well, before the original March meeting was postponed, Trump had suggested that he wanted China to send warships to the Strait of Hormuz to try to reopen it. The administration back then said that the decision to postpone had nothing to do with China, for the most part, staying out of the conflict. But that is part of the backdrop of all of this, as is China's foreign minister this week calling for a ceasefire between Iran and the U.S., while also saying that his country supports Iran in safeguarding its national sovereignty and security.

11:10So China, I think, is walking a bit of a delicate diplomatic line ahead of this meeting next week with President Trump. And we also can't forget that we do have Trump's tariff regime as another backdrop to all of this. But as for what we can expect out of this meeting, our senior trade writer, Alan Beattie, says that it's likely to produce little except maybe goodwill pledges of future Chinese investment in the U.S. Well, we will be watching that very closely. Victoria Craig hosts the Monday edition of this show. Be sure to catch that in the podcast feed to start your week. Thanks, Victoria. Thanks, Mark.

11:49Before we go, results are trickling in for this week's UK local elections. It's a huge moment for Prime Minister Keir Starmer and his Labour Party. Our friends over at the FT podcast Political Fix will break down what happened and what this means for the UK. You can find that discussion right here in this podcast feed tomorrow.

12:11This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Safiya Ahmed, Katya Kumkova, Sonia Hudson, Fiona Simon, Victoria Craig, and me, Mark Filipino. Our show is mixed by Alex Higgins, Kelly Gary, and Sam Giavinko. We had help this week from Peter Barber, Michael Lello, David Da Silva, and Gavin Coleman. Our executive producer is Topher Forhez. The FT's global head of audio is Cheryl Brumley. and our theme song is by Metaphor Music.

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