00:00:00
Everyone hates GameStop and it seems like everyone in the media basically wants us to fail and wants them to
00:00:05
succeed and you've got a board that's making hundreds of thousands of dollars a year. They don't buy stock with their
00:00:11
own money. They end up showing up to a handful of board meetings and they're making a fortune. You've got a
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management team that is grossly overpaid. There's nothing more American than basically risking your own capital.
00:00:25
So why does everyone want us to fail? Apploven started with an $8 domain and no VC funding. They built anyway and
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00:00:46
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00:00:52
brand doing $4 million tried AppLovven ads, hit 16 million, turned profitable, and they're on pace for $80 million this
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year. Visit apploven.com/allin to launch your first campaign today. >> Ryan Cohen, welcome to the All-In
00:01:08
Interview. Thanks for being here. >> Thank you for having me. >> I think it's been like a decade, which
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is crazy how old we get since you and I last had dinner in New York. This was before several chapters of your life
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unfolded. And it's great to be talking with you today. You're doing something really
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interesting right now, trying to acquire and run eBay, which obviously is a big story right now that takes us back 25,
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30 years to the start of the internet. But I want to talk a little bit about your story first, if that's okay. And
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I'd love for folks that are watching this or listening to this to to learn a little bit about you and the journey
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you've been on that brings you to this moment. Maybe we can go back to the the business you started, Chewy, if that's
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okay. >> Yes, definitely. >> Yeah. Well, maybe tell me why you started Chewy. How did you get that idea
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and and how did you get into building this business from where you were coming from at that time?
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We were um wanted to build something online and we were uh about to launch an online
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jewelry website. Did not know anything about jewelry. Went to a bunch of trade shows, bought hundreds of thousands of
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dollars worth of inventory, built the website, had the distribution, and then I was shopping in a
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neighborhood pet store. Uh, I had a poodle and I was going every few weeks and it just hit me on one of my trips that I
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understood the product much better. It was a recurring revenue purchase. The market was still fragmented. The
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fact that there was still neighborhood pet stores at the time and they had not been disrupted by Petco and PetSmart was
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fascinating to me. And then you had you had Amazon, which was established and had pet products since the '9s, but they
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hadn't really achieved real scale in the category. So, the vision was to replicate the same experience that I had
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at the neighborhood pet store, but do it online and do it at scale. And I looked
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at Amazon's best practices when it came to supply chain. So, fast shipping, having a great selection, being
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competitively priced, and then the experience at the neighborhood pet store of knowing the products really well, and
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it was easy to be passionate about the pet category cuz I'm a pet owner and everyone we hired were pet owners. And
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uh it was all about market leadership as a low margin business. hindsight, not necessarily the best idea to go
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head-to-head against Amazon, selling 30 lb bags of pet food, but we executed really well and we grew really quickly
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and we had negative working capital and so it was a business that was able to get uh billions of dollars in revenue
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and and not consume a lot of capital. How did you learn to execute well? So, at the time you had little business
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experience prior to that. How did you learn those skills? What were the principles and the values that that made
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you excellent at operating that business? >> I understood from the beginning that
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the real competition was always Amazon and they were world class when it comes to supply chain. So negotiating
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very fiercely with suppliers to get the best product costs. And that meant getting to scale and going from buying
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pallets of dog food to truckloads of of dog food and moving from distribution to
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direct and buying generally the more you buy the lower the prices are going to be. operating efficiently in the
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warehouses and so labor optimization, warehouse management optimization, getting competitive prices with shipping
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carriers. It was a game of pennies and we you know we were the the goal was to grow quickly and establish market
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leadership and the difference between failure and success was you know pennies in the red is failure and and and
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pennies in the black is success. So, uh, we had to operate hyperefficiently and there was a lot of competition in the
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space. It wasn't a novel idea. It was going head-to-head against Amazon and Pets.com was in the backdrop. Um, so it
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made it very difficult to raise capital, but I'd say at a at a high level, the market underestimated
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not not the size of of the addressable market, but our execution. you know, as a customer, I've had lots of dogs. It
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was always such a great consumer experience. Did Did you personally put your finger on that or did you bring
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great people around you that understood consumer apart from the supply chain optimization, the labor optimization,
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getting the the cash flows to work, right? Was there a lot on the consumer product angle that you spent time on
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with that business? When we looked at the cohorts, you could see the customers were very sticky and
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the I looked at it the reason why I moved from jewelry to pet food was cuz it was
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a recurring item. So I love the fact that it was consumable and when we started Chewy for the first few years we
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just focused on food, treats, litter, all of the things that people are buying all the time. So
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the the vision and the idea was if we treat our customers well, they're going to continue shopping with us and and
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that's what we did. And so it was everything from the handwritten holiday cards to the pet portraits to 24/7
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customer service. And uh if there was ever an issue, you know, we took care of the customer and that um that's what
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happened. and and the customers continued shopping with us and and the best referrals are word of mouth and um
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pet owners love to to tell their friends and fellow pet owners if they have a great
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experience. So >> the thesis ultimately played out. >> So for those who don't know, you built
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and sold the business in 2017 for $3.35 billion. Subsequently, there was an IPO and that
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business continued to trade up in value. So, you clearly executed well, but help
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me understand how did you build and manage the leadership team, the management team and the people around
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you to execute so well. What did you learn as a manager, as a CEO, as an operator when you were building Chewy?
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>> Staying on top of everything. Ju just it's 247 watching all of the numbers. I mean, I
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would uh stay in Google AdWords till 4:00 or 5 in the morning managing campaigns myself. Um, I was negotiating
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directly with all of our major suppliers. I had a supplier that told me during one of our negotiations actually
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said it was like a one or oneear contract and he's like, "I'm so happy this is over. I never have to talk to
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you for well it was it was basically another year." He's like, I don't have to speak to her for next year. I was
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like, that was a compliment. I would And anytime someone else was doing the negotiation, I mean, it's
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counterintuitive. They want to build relationships with suppliers. The reality is is
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it's mostly transactional. And so, if our suppliers are sending us gifts in the mail, that's a really bad sign. It
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means we're overpaying. If our suppliers are telling us they never want to speak
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to us again, it means we're getting the right price. But getting people into that framework
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>> is not easy because the the the path of least resistance is basically to get along and and to be nice. But
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unfortunately when you're building a business and you're losing money, you got to focus on on sustainability. So
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just uh being on top of everything. >> And what about on people? I'm just trying to understand your your skill as
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a manager of people because clearly you did something right and you continue to execute at GameStop which we'll get to
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in a minute and I'm trying to understand how do you find great people and how do
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you hold people accountable and what are management techniques that you've developed for building a team and
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running a team? I look for will overkill and um I had a woman that was running customer service
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as an example and she came from uh she was working in like an old people's home and she applied for the job many times
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and we just we didn't think she was qualified and we looked over her resume uh and she kept on applying. She was
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relentless. Uh so on paper, she didn't necessarily have the right experience, but she had drive, she was motivated,
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she wanted to work, and she ended up being incredible. So, I mean it was in general it was finding people that are
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dieards that are just willing to put everything in, go all in, no pun intended, um, and basically be as psychotic as as
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me. And that was the team that we put together. It was just a bunch of fellow psychopaths.
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>> And psychopaths attract psychopaths. And the the engine is running at that point.
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>> Exactly. Exactly. >> Yeah. A A's only put up with A's. >> Exactly. Yeah. And do you regret selling Chewy
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when you did? Because I mean it went public at like what 20 billion market cap like two years later. I mean
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>> as soon as I sold it, it just >> took off. >> Were you a liability? No. I'm like what
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happened? >> Well, I mean uh you know typical if you talk to the investment bankers there
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we're like you know we're getting a an amazing price and then all of a sudden it goes public and there's basically a
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lot more than what anyone had guessed. So, nobody has a crystal ball. Um, Chewy was my baby. I put a lot of uh I love
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that business. And um so yeah, and everything everything works out for a reason in life one way or
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another. >> Yeah. >> And we wouldn't be having this conversation if I was still running
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Chewy. So, or at least maybe we would, but it would be about dog food. Something
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>> we'd be talking about how you built a hundred billion dollar market cap dog food company. But
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>> Exactly. So after you sold it, you kind of became a pretty active investor. Is that a fair
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statement about the next chapter for you? >> Uh I went activist for the first time.
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Yeah, that's that's a that's an accurate statement. >> Well, you were like a pretty active like
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just general like you would buy and hold concentrated positions and in stocks. Is
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that is that fair at that stage? >> How did you pick companies? So what did you look for and how did you make the
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investments you made? maybe you can walk us through a couple of the stories of what you you went through at that stage.
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>> Um, I looked for established businesses that have a strong historical track record of making
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money and typically are out of favor when it comes to passive or activist kind of investments. And so, um, that's
00:12:55
been my general framework. >> Why did you choose to go activist when you kind of started making these? Were
00:13:01
you getting frustrated in conversations with management, decided to take it public, or was there a model that you
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were kind of going after where you saw others have success with publicly calling out issues in businesses and
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driving change? Well, when it came to GameStop, originally it was a passive investment
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and I owned under 5% and the CEO actually reached out to me cuz they were fighting
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um an activist and they wanted me to join the board. They thought I was basically going to be
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their friend. They're like, "Oh, this guy owns a few percent of the company and let's give him a board seat and
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he'll help us basically fend off um this activist and so they kind of put the idea in my head.
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>> This is around 2020, right? >> It was Yes, exactly. Uh so I wasn't in a place uh my father had
00:14:01
just died recently and they offered me a single board seat and I'm like if I'm going to do this you know I looked at
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the board and they had a really large board and they're offering me a single board seat and it just wasn't
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attractive. And then you know co things got a lot worse. They were deemed a non-essential store
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basically like kind of on the verge of bankruptcy. The stock traded down significantly
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and then I continued accumulating. I ended up going above 5%. At that point, I needed to decide, am I going to file a
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G or a D? A 13G is basically if you want to be passive, which means you're not going to engage with the management team
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at all. And a D is where you are going to engage with them. So that was an easy decision once I crossed over 5%. And I
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remember actually getting a call from the CEO of GameStop at the time and he's like, "Yeah, we were discussing me going
00:15:00
above 5% and filing the required SEC forms and he's like, "Did you file a D or a G?" And I'm like, "A D." And a D
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obviously is, you know, it's intended that you're going to be activist, even though it doesn't necessarily mean you
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need to be hostile. It just means you're going to engage with the management team. So, um, anyway, basically that's,
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uh, that was what happened. >> But going back to GameStop, how did you first identify GameStop? Because the the
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kind of storyline is, hey, Wall Street Bets put something on the internet and everyone starts paying attention to it
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and becomes a meme stock. Was there fundamental unrealized value you saw? Because you seem to be a real kind of
00:15:45
unrealized value investor is how I would kind of describe. Tell me if you disagree that there's real value in an
00:15:51
organization that's not being realized its potential. What did you see in GameStop? How did you first identify it
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and get involved and start accumulating? I found it fascinating that everybody was like,
00:16:09
for whatever reason, and still to this day, everybody hates like the the mainstream media, the the general
00:16:18
consensus has been that GameStop is going to be is was going out of business like a long time ago, right? Like 15
00:16:24
years ago, this thing was basically shorted to oblivion. Uh, and everyone was betting against it
00:16:31
and everyone's basically just hated it. It's one of those things where when you even say GameStop, everyone's like, uh,
00:16:36
like really, you're an investor in GameStop. So, that's always for as long as I remember, that's basically been the
00:16:43
reputation is like the underdog. Everyone loves to take the other side of the trade or bet against it. And so, I
00:16:52
like that. Like I like the idea of going into a situation where you're basically
00:16:57
running into you're running into a burning house. And I originally did it as an investor cuz typically that's
00:17:04
where you see opportunities is when there's a lot of pessimism and fear. And then you know I ended up basically
00:17:15
not necessarily intentionally uh joining the board and then ultimately being the CEO. But that wasn't the
00:17:24
original plan. The original plan was basically to be a passive investor and then I basically ended up just it's like
00:17:31
there was no one else to do the job so someone needs to do it and here we are today.
00:17:37
>> Was there a thesis on value realization or was it just about the market had the
00:17:41
value wrong? Did you think at the time there was operational changes that could drive more value or was it just like hey
00:17:48
everyone's got this shorted everyone's got this to the wrong side. The original thesis was that there's an upcoming
00:17:54
console cycle and that they're probably going to survive until the upcoming console cycle and the new PlayStation
00:18:03
and Microsoft Xbox comes out. And it was a very cyclical business. And GameStop typically does very well in the
00:18:12
beginning of the console cycle when the market is very very tight and people are
00:18:17
basically running a gametop to buy hardware and software. And so that was that was the original thesis and then as
00:18:24
I got pulled in obviously the business is completely different and the thesis has changed. Uh but that's where I
00:18:33
started as a as a passive investor. So then they ask you to join the board, but you make the point, hey, if I'm going to
00:18:41
be involved, I need to have more board seats. Is that kind of how the evolution?
00:18:45
>> Yeah, they thought I was basically just going to join the board and be a pathy,
00:18:49
>> right? And then you said, >> you probably picked the wrong guy to think that that was going to be the
00:18:55
case. >> So then you went public with your views. Is that is that right? and kind of
00:19:01
>> so I think it was 2021 like early 2021 you joined the board with two other executives from Chewy,
00:19:10
two friends of yours or two two colleagues of yours. Is that is that right? >> Exactly.
00:19:13
>> And then the stock took off and all of the hedge funds that were short had to
00:19:17
cover and the stock price just ripped. >> Exactly. >> And this is the whole story. So then in
00:19:21
2021 the company raises billion7 wipes out all the debt and what was the plan at that point in the business
00:19:30
cycle? Was there an investment operating plan that you were trying to get the the
00:19:34
team to execute against? >> The original plan I learned a lot at GameStop. I basically
00:19:45
took I went in and I had this bias from Chewy, which is basically like everything that I learned at Chewy I was
00:19:55
going to apply to GameStop. And it took me about I don't know maybe just over a year to realize that was
00:20:06
really really stupid. But I ended up hiring a bunch of e-commerce people from Chewy and Amazon. And I wasn't the CEO.
00:20:16
I hired a CEO. So, you know, I I didn't have day-to-day visibility on what was going on. But the strategy was to make
00:20:25
GameStop more like Chewy. And that was the wrong strategy. And once I became the CEO, I quickly adjusted because I
00:20:37
mean I I just frankly I looked at the financials and saw it didn't make any sense.
00:20:44
And then it was, you know, went into maniacal cost cutting mode, efficiency, basically focusing on what GameStop is
00:20:52
really good at, which is the pre-owned side of things. um and focused on running the retail
00:21:01
business very very well. And then ultimately that led us to the category the category of collectibles which you
00:21:10
know today the business is a leader in the collectibles category and uh software makes up a very small percent
00:21:16
of the business but there were a lot of learnings on the way and you you look at
00:21:21
basically Chewy and GameStop you say well they're both retailers you take the same playbook but that's not that was
00:21:27
not the case uh totally different animal and you know one is you've got repeat purchases and you've got these really
00:21:37
sticky cohorts and you know we can never over buy inventory for instance at Chewy
00:21:43
because we would end up ultimately selling it. the revenues were growing and we turned the inventory very
00:21:49
quickly. Whereas we ended up buying all kinds of inventory at GameStop and ended
00:21:54
up having a bunch of TVs and um inventory that ends up getting stuck in the stores and if you don't sell it you
00:22:03
end up basically taking down you know losing a lot of money and marking it down. So lot of learnings along the way
00:22:12
for me to understand physical retail which when I joined the board I when I became CEO I had zero physical retail
00:22:20
experience. So >> did you think a lot about here are the different categories we could leverage
00:22:28
this GameStop network the stores the consumer into besides collectibles? How did you
00:22:34
kind of pick the expansion into collectibles versus any other sort of used category you might be able to kind
00:22:41
of move into? >> We were already in the category. We weren't deep in the category and we did
00:22:48
try a few different other things within consumer electronics that just really didn't end up taking off like
00:22:55
collectibles did. And um you know if you look at at TCG in particular but now we're growing uh in sports as well has
00:23:06
been very very very popular. So, we tried a few different things and the the trade-in model especially, you know,
00:23:14
worked really well where like today you could basically bring in a not basically
00:23:19
you can bring in a graded PSA card eight and above and we will give you cash on the spot. We buy back the card and then
00:23:30
we either sell it in the store or we bring it back to our warehouses and we sell it online. So that was very similar
00:23:38
to the trade in model that we had on both hardware and software and it was very extendable to the trading cards
00:23:46
category as well. >> As you made this change, did you have to change the team a lot? Management team,
00:23:53
I mean what was the turnover like after you became CEO at the leadership level and then below the leadership level? It
00:23:59
was identifying the talent at the company and basically having them working directly with them.
00:24:08
Like the the people who know GameStop the best have been the people that have been there for a long time and me
00:24:16
working closely with them um ended up working really well. >> You brought in others obviously as well
00:24:23
>> to complement that. Yeah, some some but I mean generally you know working with uh the people that
00:24:31
have been there that know the business really well. >> Yeah, some folks who have managed
00:24:36
multiple businesses or been CEO and applied their skills to different business lines. You know, I interviewed this guy
00:24:45
Charles Ko a few weeks ago from KO Industries. He's got a whole set of principles that he tries to apply to
00:24:52
running a business. and those principles he's used to build and acquire and operate multiple different kinds of
00:24:58
businesses and he transforms the business by applying his principles to how he runs them. Do you have a similar
00:25:04
sort of framework or model or machine that you use for running the business, assessing what's working and what's not
00:25:11
working that you then bring to bear on GameStop, on Chewy, and maybe next on eBay that you've used repeatedly that
00:25:19
works well for you? Or is everything kind of truly zen mind, beginner's mind, first principles approach to thinking
00:25:25
about the business? I'm sure I do, but I'm not good at articulating it. So, I don't know if I'm the right person to
00:25:37
be able to say what's going through my brain. Sometimes, like >> whatever I'm feeling, I can't even
00:25:45
necessarily describe it. And if I describe it, it ends up being wrong. So, someone else could probably do a better
00:25:52
job at answering that question than me. What do you think someone else that's worked for you repeatedly would say it's
00:25:58
like to work with you? >> You'd have to you'd have to ask them. >> Okay. So, >> hopefully not good things. Hopefully not
00:26:07
good things. >> Yeah, the pressure is on. >> As the global economy becomes more connected, trust becomes the most
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at nasdaq.com. The numbers speak for themselves in terms of what you've delivered at
00:26:44
GameStop. I think collectibles is now 42% of revenue, $350 million. In Q1, revenue was 835
00:26:52
million. You grew at 14% year-over-year. You cut SGNA from 228 to 202. You have 9.7 billion in cash, 333
00:27:03
million in free cash flow, and the board's just authorized to share repurchase. So, it's pretty tremendous
00:27:09
how you've operated this business. So, so help me understand a little bit as you're building GameStop, operating it,
00:27:16
and executing. What makes you lift your head up and say, "Hey, we should be doing acquisitions and looking at other
00:27:22
things instead of just building everything organically in house." >> If you look at the size of the business
00:27:29
that I can build organically with GameStop, it's nice. It's okay. But I like to do big things. And you know,
00:27:42
Chewy is a good example. It could have been a $500 million business. It could have been a hund00
00:27:47
million business. It could have been profitable if we would have spent a lot less money on marketing. But
00:27:53
life is too short to do it small. So we have the if you look at how complimentary
00:28:07
and as we've gone into the collectible space, I've come to appreciate eBay. uh differently.
00:28:20
And if you look at how complimentary these two businesses in from a a lot of different dimensions, the secondary
00:28:28
market side of the business, the collectible side of the business, the ability to provide liquidity to
00:28:35
consumers, what we're doing in stores, eBay is doing online. Um, authentication of secondhand items.
00:28:49
There's there's so many uh aspects of the business that are similar except that eBay is global and has significant
00:28:59
scale. Um and frankly, it's a business that I understand a lot better than physical
00:29:08
retail. Um cuz I know a thing or two about e-commerce and it's an area where frankly I'm much more comfortable
00:29:15
operating. And so when you look at how much the businesses together make sense and then you look at the fact that it's
00:29:24
within my circle of competence, it's uh all I can't stop thinking about it. So I look at Chewy as like
00:29:41
>> Chewy in hindsight, we had a lot of competition in the pet space that were really wellunded and they were decent
00:29:48
operators and they didn't end up making it because, you know, it was a low margin business going headto-head
00:29:55
against Amazon. And it's similar to like the the airline industry where people don't really care about the actual
00:30:03
airline they're flying. They're just basically shopping by price. So >> yeah, >> that that was selling pet food online.
00:30:10
Not a great idea. And you know, GameStop, I don't think was such a good idea either. This was this is actually a
00:30:17
really good idea whether it ends up working out or not, but this is actually a really good idea. We'll see what
00:30:23
happens. >> Was there a moment you remember when you said, "Shit, we should make a play for
00:30:31
eBay." Do you remember that moment when you were kind of looking at the business
00:30:35
or thinking about the business when this idea kind of sprung forth? >> Yes, I know.
00:30:42
>> What was it? >> I I was on the toilet. >> Okay. And you were just thinking about it
00:30:52
>> pretty much. >> I'm assuming you've been studying the business cuz you're in the collectibles
00:30:58
business and learning a little bit about it and had this idea. sitting there. >> Yeah. I mean, I've followed eBay for a
00:31:05
very long time and I came to appreciate their um their their experience, their uh their their moat in the collectibles
00:31:15
space. But it's not just collectibles, too. I mean, it's the refurbished tech piece of
00:31:21
the business where >> Yeah. >> GameStop, it's a big portion of our business, and it's a big portion of of
00:31:28
eBay's business, too. in the secondhand business as well. So, there were other things that
00:31:37
I thought about where I could personally add value and might make sense for GameStop, but this one made sense for me
00:31:45
personally and it makes sense for GameStop. So, >> so if you have studied eBay, what do you think
00:31:56
the team did right in the early days? Was it simply the network effect and the business took off and once they had the
00:32:03
network it was hard to break the moat? Was there anything about the formula or the consumer model or experience? Cuz
00:32:10
you you've said publicly, hey, eBay looks a lot like it did in the early days. Was there something about early
00:32:14
management, early design principles, early engineering? Anything that happened in the early stages of eBay
00:32:20
that made it what it is today? >> I, you know, I look at basically the marketplace model where they had first
00:32:26
mover advantage. So their ability to have first mover advantage and really be the like de facto marketplace online
00:32:36
including against Amazon was was significant. Um so that was really helpful. I wouldn't
00:32:46
say that if you look in general at the growth in e-commerce and you look at Amazon as an example
00:32:54
that basically took the marketplace model but also took taking possession of firstparty inventory along with growing
00:33:01
their marketplace and like they ultimately scaled it and they essentially did what Walmart was doing
00:33:06
but they did it online and at scale. I mean, obviously you can't compare the two, but they they their focus on
00:33:16
building a marketplace gave them a moat and staying power, but I wouldn't say that their execution
00:33:25
was great. In the early days, it was great when it was founder operated. But since then, if you look at how much
00:33:34
e-commerce has grown and how much market share they've given up to the likes of basically everyone, new competitors in
00:33:41
the space that are very category focused, live shopping competitors picked off significant share from them,
00:33:52
Shopify, social commerce, Amazon, eBay's been able to maintain a revenue base and
00:34:00
and and generate earn earnings, but they haven't grown along with the rest of e-commerce. So, and and if you look at
00:34:08
how they've done most recently, I mean, they've basically the business has stagnated up into the last few quarters
00:34:14
and their operating expenses are up significantly. So um it's not to say you know they've they
00:34:22
they are the de facto marketplace online especially in certain categories but that business should be significantly
00:34:30
larger. >> Do you think they missed the boat and if so why on stores? You know Amazon
00:34:37
stores, Shopify obviously have become categories unto themselves. All of those power sellers probably transitioned over
00:34:46
to having stores at some point. What did eBay miss? Was it purely execution? And
00:34:51
is there still an opportunity to win back that market? >> eBay could I mean and and I'm not
00:34:56
advocating I mean this is not something I would not go head-to-head against Amazon today. But I mean eBay could have
00:35:02
been Amazon. So when you look at what Amazon has built, I mean everything from uh taking inventory and their principles
00:35:12
of they provide a great customer experience and so I mean that's why we all love
00:35:18
shopping on Amazon and as a seller seller central is a very powerful platform and sellers generally like it
00:35:26
too. I don't know if they necessarily like the margins, but they can move a lot of inventory on Amazon. So,
00:35:35
eBay by doing nothing has basically carved out a niche in certain categories where
00:35:44
Amazon isn't strong because they're strong in other categories and you know, you're
00:35:50
buying a a phone charger or new products. It's not necessarily the place where you want to search for like a uh
00:35:58
uh a unique baseball card or a a hard to find pen or a used auto part. I don't know if it was necessarily
00:36:11
through strategy or just because they ended up they ended up basically like defaulting
00:36:17
into those categories cuz their largest competitor was focused on other things. >> Do you think Amazon's over earning right
00:36:27
now? Cuz I I think the point you make resonates with me. I've been involved in a number of businesses I've been on the
00:36:32
board of and I see the margin that Amazon takes for seller from sellers and everyone's frustrated about it. It
00:36:38
almost feels to me like everyone's hungry for an alternative, but the reason you stay on Amazon is the reach
00:36:44
and the audience that you get with Amazon. So, there's not a lot of other places that offer a competitive
00:36:50
alternative to Amazon to those sellers. eBay's got a pretty big audience. I mean, do you think that Amazon's over
00:36:57
earning in that sense? And is there an opportunity for eBay to step up and compete in that sense?
00:37:03
>> They charge a lot of money to their sellers. I I agree with you. And um sellers like it because they move a lot
00:37:11
of inventory, but they don't like the margins. >> The problem would obviously be
00:37:15
inventory, right? I mean, if eBay were to go in that direction and you were running eBay, what do you think you do
00:37:19
about inventory and logistics? >> I would not be interested in taking in firsthand inventory. I like the
00:37:27
marketplace model and and the categories where eBay is doing well are categories where GameStop
00:37:36
is doing especially well also. But um going head-to-head against Amazon is um it's uh it's it's it's not the most
00:37:50
attractive business. eBay is notorious for having bought and then sold a number of big businesses.
00:37:56
They bought PayPal and then later spun it out and divested and they bought Skype for 2.6 billion in 2005 and then
00:38:04
sold 70% of it for 2 billion in 2009 and then they got lucky with Microsoft overpaying in 2011 and they made another
00:38:11
2 billion on it. So they they netted a good profit on on the Skype sale. So when you think about the audience that
00:38:17
eBay has the the user base, there's a lot of ancillary businesses you could get into. When you look at PayPal, when
00:38:23
you look at Skype, were those strategic errors or were they tactical errors? Meaning, they were good strategic moves,
00:38:30
but they were mismanaged and not well integrated, not well run after the acquisition. What do you think happened
00:38:35
there? >> Well, if you look today at eBay, I mean, I I like focus. So, them focusing on
00:38:45
core eBay makes sense. I mean, my strategy at Chewy wasn't creating all these other subprs for different
00:38:53
geographies. It was always focusing on on Chewy. So, um, the focus is helpful. I'd say in eBay's
00:39:04
case, hasn't resulted in significant GMV growth, if at all, or earnings growth. But, I do like being focused.
00:39:14
Now, I mean, they've recently made acquisitions, which uh don't make sense, but generally speaking, like I like
00:39:23
focusing on a singular brand, and especially with a business that's global, there's a a lot of upside, and
00:39:30
you know, eBay plays in a ton of categories already. So, it's hard to do multiple things exceptionally well.
00:39:37
>> Yeah. The other example, obviously, StubHub, which they bought and then sold to the founder, Eric at VGO.
00:39:44
for four billion years later but also didn't didn't really transition well. Does that mean that eBay can't really do
00:39:50
well in other marketplaces or do you think it's about building the product organically in a better way to expand
00:39:56
into other marketplace verticals? >> Yeah, building it organically through eBay and through focus um
00:40:07
is is where I where I where I believe makes the most sense. what's happened with the business in the
00:40:14
post Dono era. He left I think what did he leave a couple years ago 2015 and it's been about 11 years. I mean if
00:40:22
someone were to ask you hey give me your summary of what's happened to eBay in the last 11 years how would you kind of
00:40:27
talk through what's happened in the business? I mean if you just look at how they've done in the past since co
00:40:35
every important metric is down uh GMV is down, active users is down by 30 million. Operating earnings is down.
00:40:46
Revenue now is you know basically essentially break even. It's up a few points and operating expenses is up
00:40:52
significantly. Their operating expenses now are for a business that has no inventory. They're operating their
00:41:00
revenues are their operating expenses are over half of their revenues. So that's a business that
00:41:08
they're not growing. Everybody else in e-commerce is growing and they're making less money and
00:41:15
they're spending a lot more and their sellers frankly aren't happy. Like it's you talk to sellers and in order for
00:41:22
them to do business on eBay, they have to use all kinds of thirdparty tools outside of eBay because
00:41:30
eBay is not even providing those tools. I mean, Amazon seller central is is uh is like soup to nuts. You could
00:41:39
pretty much do everything in seller central. Whereas with eBay, uh, it's a pain and and
00:41:47
they alienate their sellers. I mean, they had concierge programs for their top sellers and now it's like they take
00:41:54
their sellers for granted and they're taking advantage of them. So, the sellers in a marketplace model like eBay, the
00:42:03
sellers are the customer. You make your sellers happy, you give them the tools, they bring more inventory online, and
00:42:10
you end up ultimately doing more sales, and they're not working with their sellers to make them happy. So, it's not
00:42:18
that complicated. You talk to the sellers on the phone, you talk to the top sellers, you ask them what are the
00:42:23
pain points, and you get the engineering team on the phone with the sellers, and
00:42:28
you start basically banging them out. But, you know, I guess uh existing management team doesn't roll up
00:42:38
their like they're not going to roll up their sleeves. They're going to go to outside consulting firms to tell them
00:42:43
how to run their business. >> Is that what's happened? What you state seems obvious? So, do you think it's
00:42:48
that management's simply been complacent and collecting a paycheck and no one's acting like an owner, no one actually
00:42:55
knows how to execute, or do you think they fundamentally would disagree with that strategy, those points that you're
00:42:59
making? Well, I mean, they're never going to admit it, but I would I would bet everything that they're working with
00:43:07
multiple outside consultants and for a different for a lot of different reasons and they're not making their sellers
00:43:16
happy. So, their sellers are on the platform because they do a lot of business on the platform and they want
00:43:23
to move product, but they don't feel like eBay is wants to make them succeed and is
00:43:31
working with them to do more business together. So that's what happens when you go from a business that founder
00:43:41
operator run to business with a professional management team is you know you lose the the one-on-one and the just
00:43:52
the rolling up your sleeves really getting into solving the root cause of problems.
00:43:58
Do you believe in building long range operating plans? Meaning, would you articulate a strategic vision
00:44:07
for eBay and then write out what you're going to do over the next 3, four, five years so that the shareholders that are
00:44:14
considering your acquisition offer can see both your vision and your plan for execution on that vision over the next
00:44:22
several years? or are you much more of a responsive manager where you're going to
00:44:26
go in and diagnose and be much more of a tactician in iterating almost in an agile way the business to success. How
00:44:33
do you kind of think about presenting how you're going to be more successful in operating this business than existing
00:44:38
management? >> So there are three areas. Number one is on immediately improving earnings
00:44:49
through cutting costs and pulling $2 billion of costs out of the business and on the operating base of,
00:44:59
you know, close to 5.5 billion of expenses. Um, and $2.4 billion spent on sales and
00:45:06
marketing for essentially no user growth. um there's a lot of money to pull out there. So you have the immediate
00:45:16
increase in earnings through cost cutting. That's basically one. And then there's two growth vectors that um I'm
00:45:27
very much interested in. Number one is live commerce and there's a large competitor that is completely crushing
00:45:36
it and eBay has the users. eBay has the brand, they have a platform, but the platform sucks for a lot of different
00:45:46
reasons. Uh, and they don't have the content creators on the platform and nobody even really knows eBay Live
00:45:53
exists. There's like an application process. I talked to sellers and they're telling me
00:45:58
like they've applied to be uh to be a seller and they are waiting to get approved. It's like they're basically
00:46:05
stopping themselves from being successful and getting content creators onto the platform. Uh, and then the
00:46:12
entire back end of eBay Live also sucks. So, live commerce, the TAM is like 400 billion. It's growing very quickly in
00:46:21
the US. It's very popular in Asia. And eBay Live should be significantly larger. They should be the category
00:46:29
leader in the space. and they have like at max a few hundred people you know in um you know basically watching watching
00:46:39
their uh watching watching their sales. So that's a huge huge growth opportunity
00:46:45
for them to start doing really well in live commerce. Uh and the benefit also we have with the stores beyond basically
00:46:52
fixing the platform the front end and the back end uh using the stores there's 1,600
00:47:02
essentially nodes that can be used as studios for creators. They could be used as fulfillment and logistics and
00:47:09
ultimately allowing sellers and content creators to do what they do best which is create content and we can help them
00:47:17
on photography, we can help them on fulfillment, we can help them on logistics um and we can also do the authentication
00:47:25
and that extends to the marketplace model as well. So uh I would focus a lot on on growing the
00:47:34
live commerce side of things beyond the cost cutting. And then the third thing is and this is something that I have not
00:47:44
spoken about before publicly but eBay today is the leader in physical items, physical collectibles as an
00:47:56
example. And so I would extend the that into digital collectibles. And essentially, if you look at all of these
00:48:06
in-game items, AAA titles that people are accumulating, skins, weapons, all of these things, taking eBay and
00:48:17
building a marketplace where you can provide liquidity for in-game digital items. Essentially, it's what NFTTS
00:48:26
could have, people thought they were, but ultimately they had no real utility. In-game items actually have real
00:48:34
utility. And if you look at all of these collectibles, frankly, they're an ego play. You own art. Like, what is that?
00:48:42
At the end of the day, it's an ego play. Um, if you look at trading cards, I mean, it's a piece of cardboard in a
00:48:50
piece of plastic. and they're very very very popular, but there's no real utility to them other
00:48:56
than being able to tell people you've got these really a really unique trading card. But if you look at in-game digital
00:49:03
items, there's no marketplace that is providing liquidity for them. And so I would use eBay to uh to provide
00:49:12
liquidity for in-game digital items. And I believe that addressable market is significantly larger than
00:49:21
uh could be much larger than eBay's marketplace on physical items and no one's doing it. And and this should
00:49:30
already exist and it's kind of like it's crazy that it doesn't exist. >> The eBay board has rejected your offer.
00:49:36
Is it that they're looking at Ryan Cohen saying, "Hey, you're a guy that ran Chewy for a few years and sold it and
00:49:41
you've been running GameStop. You've never really operated a business of this scale. We're not going to hand over our
00:49:48
shares for your shares and put you in charge of this overall enterprise. You don't have the experience. You don't
00:49:54
have the skills. You don't have the competency. What's their rationale for rejecting your bid? And what's the
00:49:59
feedback, the frank feedback you've heard either behind closed doors or through, you know, third parties about
00:50:05
what's going on here? >> Well, they put out a rejection letter which said that our offer was
00:50:10
incredible. And there was a lot of uncertainty and you know frankly and by the way I mean
00:50:18
this is expected. They don't want to hand over the reigns. They're making a lot of money and so I completely
00:50:27
understand why they're taking the position that they're they're taking. But you know they they spelled it out in
00:50:36
the rejection letter. And number one was uh you know that like the the financing
00:50:43
uncertainty which frankly if we can't get the financing it means that eBay can't get the financing because we're
00:50:48
getting the financing off of eBay's balance sheet. But there's been very you know there has not been very much
00:50:56
engagement from the management board level. Frankly there's there's been really no engagement. I mean they're
00:51:03
they're playing games. they pointed us to their highpriced advisors and then when we reach out to schedule a meeting
00:51:10
they they don't schedule the meeting. So So when you first started having this idea sitting on the John and you're like
00:51:21
I'm going to move forward with this thing. I'm assuming at some point you called bankers and talked about
00:51:26
structure around this to figure out how do we put this bid together. Where do you go down the path where you
00:51:34
said let's do half cash and then convince them to take our stock and basically roll their stock into our
00:51:41
stock and let us run the business versus raise the capital to do an allcash offer
00:51:47
for the company? Is it impossible for you guys to convince shareholders, investors, capital providers, large
00:51:56
institutions, banks, lenders, and so on to put together a syndicate of $56 billion of cash? So, you could make this
00:52:03
an allcash offer, which would make it a lot harder for them to simply reject so easily. Maybe you can walk us through
00:52:10
the banker conversations and the process you've gone through in thinking about structure here.
00:52:14
>> Ultimately, the decision is who do you want to run the business? And who do you think is more competent
00:52:21
to run the business? And who's going to maximize shareholder value? Because by giving existing shareholders, GameStop
00:52:30
shares, uh, GameStop, the combined company, the at least in the very near to medium
00:52:41
future, the earnings are coming from eBay. So, they're going to continue owning eBay. offering them 50% cash, 50%
00:52:50
stock at a premium to where we bought it. And essentially, they get to continue owning eBay, except you've got someone
00:53:00
that is highly incentivized to maximize shareholder value, knows a thing or two about e-commerce and running the
00:53:10
business efficiently, >> but why not go all cash, Ryan? Like why not raise the capital?
00:53:17
If you can raise half the cash to do the bid, why not raise all the cash? Sell your shares, sell GameStop shares to
00:53:24
investors to raise the cash that are aligned with you rather than the investors that own those eBay shares and
00:53:29
then go make them an allcash offer. >> I mean, that is not what we've presented today and that's a lot of cash to to
00:53:40
come up with. So, um, you know, uh, we don't have, uh, $60 billion of cash just lying around,
00:53:50
>> right? Well, tell me about the the the owners. Have you spoken to any of the shareholders at eBay? And do you have a
00:53:56
view on how they're thinking about voting their shares? My understanding is there was recently
00:54:02
a rejection on the ability to call a special shareholder meeting. There was a vote that failed to reduce the threshold
00:54:08
to 10% of shares outstanding. It's currently at 20%. So that failure means you cannot call a special shareholder
00:54:16
meeting without 20% of the shares calling for it. Is that right? Um yeah, it was close, but that's right. And so
00:54:25
if you go through and start talking to the actual owners of eBay today, because it's a pretty broadly owned,
00:54:31
institutionally owned stock, have you started having those institutional conversations to see where
00:54:37
folks are at and how they're feeling about management and how they're feeling about your strategy and your ability to
00:54:43
deliver value for them over the next couple years? >> Yeah. Yeah, I mean I I don't want to um
00:54:50
I don't want to get into individual shareholder discussions, but >> the consensus has generally been aligned
00:54:58
which is they love the business um and yeah they they see a lot of opportunities.
00:55:07
So, we'll see what ends up ultimately happening and maybe the composition could shift because, you know, if you
00:55:17
love the business, you might not want 50% cash. You might want to stay invested. So, you know, that that's a
00:55:24
possibility, too. Ultimately, the vote is on who's going to be a better fiduciary of capital and and who
00:55:33
can grow this business. um me or or someone that's basically selling stock handover fist and by the
00:55:41
way has not bought a single share of stock in the open market with his own money and has been selling tens of
00:55:50
millions of dollars. And you know the interesting thing in this and maybe you can help me understand this is that
00:55:58
there's no question what we're doing what I'm doing is uh it's big you know it's not every single day that something
00:56:06
like this occurs but why does everybody want us to fail? Why does everyone want GameStop to fail? And why is everyone
00:56:14
like the media as an example? Why is it that you've got a management team with no skin in the game? They're not
00:56:22
builders. They haven't built anything themselves before. They've basically just been employees at major companies
00:56:30
that have been overpaid. I don't think they've ever broken out a sweat in their entire lives. Why does everyone want
00:56:36
them to succeed? But when you have someone that And by the way, um this is going to be coming out. It hasn't been
00:56:45
filed yet. Maybe by the time that you know when this airs it will be. But I'm putting 500 million of my own money into
00:56:52
this transaction. I haven't pulled a penny out of GameStop. I've invested a lot of money into GameStop. I've been
00:57:01
doing it for a long time. GameStop's a much stronger business today. Everyone hates GameStop and it seems like
00:57:07
everyone in the media basically wants us to fail and wants them to succeed. And you've got a board that's making
00:57:13
hundreds of thousands of dollars a year. They don't buy stock with their own money. They end up showing up to a
00:57:20
handful of board meetings and they're making a fortune. You've got a management team that is grossly overpaid
00:57:27
with taking zero risk. And why is everyone basically want this entrenched management team and board to stay like
00:57:35
protected and to continue running the business and doesn't want there's nothing more American than basically
00:57:41
risking your own capital. So why does everyone want us to fail? commentators. What's your theory?
00:57:51
>> I don't know. >> Have you sat down with their CEO? >> I would love to. >> He won't take the meeting.
00:58:01
>> I would I will fly to California tomorrow. No. >> And I mean, you're the guy that's going
00:58:08
to fire him, but he's going to get a payday, right? >> A big payday. >> A big payday. What's his parachute?
00:58:14
parachute. >> Do you know what the parachute is for him? >> It's over 100 million bucks.
00:58:19
>> So, he'll get 100 million to walk away. >> Yeah. >> Have you met with any of the board
00:58:23
members? >> No. >> They won't take the meeting? >> No. >> Have you reached out? >> Yeah.
00:58:28
>> The great thing about markets, they don't care what the media says. On the short term, they might. It's a
00:58:34
voting machine, but on the long term, it's a weighing machine. And if the performance continues to be delivered at
00:58:41
GameStop, people that might want to see the company fail are going to lose because you're going to get the weight,
00:58:48
right? That's ultimately what's going to matter more than anything here. But I I
00:58:52
would assume that at this point, seeing the results at GameStop, folks have to start paying attention that this isn't
00:58:56
just a meme stock. I do think that the media, in order to give you credibility, and this would be my take on this,
00:59:04
they're going to have to acknowledge that all of their takes on GameStop just being a meme stock were wrong
00:59:11
and that there is actually a business here and that there is value being created here and that they missed that
00:59:17
and they got the story completely wrong. And so to recognize that and to recognize your competency as an
00:59:23
executive and as a CEO and as someone that can run eBay better than the installed management makes them wrong in
00:59:31
their assessment of how the cards were all laid out on the table. That would be my theory about all this because
00:59:37
everyone got caught up in the frenzy of the meme stock craze saying, "Hey, this is all just
00:59:44
fake and it's not real." And everyone agreed with that. Once everyone agrees with it, no one's allowed to rewrite
00:59:51
history. No one can ever say that they were wrong about COVID. You can't have everyone say that they were wrong about
00:59:55
GameStop because it ruins their credibility. To maintain their credibility, they have to continue to
01:00:00
make you seem less credible. That would be my take on it. >> Yeah. Yep. >> So, your next steps, you going to go
01:00:07
hostile? You going to do a tender? I mean, how's this going to go? I'm going to do whatever we need to do,
01:00:14
whatever I need to do in order to succeed. >> But you're committed >> clearly. >> Yeah.
01:00:25
>> If I'm their bankers, I get hired to run a process and maximize shareholder value. Those bankers then try and
01:00:32
negotiate with you. But the truth is, if there's no other biders, they're just negotiating against themselves. Is is
01:00:39
that fair to say? like are there other biders that could emerge here um that could beat this price that you're
01:00:45
offering that could beat this offer that you're putting on the table? >> Well, it's a lot of money. It's a big
01:00:51
premium and uh beauty is in the eye of the beholder and like it makes sense for me to pay
01:01:00
this for the business because of what I could do with the business. Not just shortterm in terms of increasing the
01:01:08
earnings, but long-term in terms of really taking significant market share in live commerce and digit building a
01:01:17
digital marketplace for gaming. That's something an existing management team would never be able to build in their
01:01:25
wildest dreams. And so it's worth it for me to do something like that. And then,
01:01:31
you know, obviously when it comes to their large competitors, there's antirust issues in terms of them
01:01:37
being able to to do a deal of this size as well. But, um, I don't know why they won't speak to me.
01:01:47
They should cuz I'm not going to stop. I'm not going to go away. But I >> another another option.
01:01:52
>> Yeah. >> Yeah. I mean, people could come along and buy the shares on the open market,
01:01:55
too, and vote in favor of your offer. So I mean this is what often happens in these sorts of situations historically
01:02:02
is the shareholder base can turn over and if people like the premium on the stock today and they don't want to own
01:02:10
GameStop stock tomorrow there's probably going to develop a good market for trading the shares if the market starts
01:02:16
to believe your story I would imagine right and so that might happen here as well
01:02:20
>> so >> there's a lot of different escalation paths that um we have in our toolkit
01:02:28
and we'll see them. Are you working with bankers? Are you doing this alone? >> Yeah, we're we're working with bankers
01:02:33
and uh highriced advisors. >> Okay, Ryan, this has been awesome to get to know you and hear about your history and
01:02:42
your vision for where you want to take GameStop and eBay. Really, man, the best of luck to you in the process and thanks
01:02:48
for speaking with us. >> I appreciate it. Great speaking to you, Dave. I'm going all in.