The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, May 14 (Reuters Breakingviews) - GameStop’s GME.N tilt at eBay EBAY.O was the wrong bid for the right company. The video-game retailer’s unsolicited $55.5 billion offer was rejected by the online auction house’s board on Tuesday. Given the hazy financing and uninspiring business logic, eBay made the right call. Yet the impulse to shake things up is harder to dismiss. Artificial intelligence’s promise is still nascent, but evidence points to real value for ecommerce. Now may not be the time to sell. As machine-learning aficionados like to say, though, it is time to execute.

Rejecting the shock bid makes sense. Tying up with a brick-and-mortar retailer after the company spent years stripping out costs would have been self-defeating. GameStop boss Ryan Cohen may be correct about eBay’s potential. He was wrong about his relevance to it.

Strip away the meme theatrics, and what remains is a storied auction platform that’s catching a second wind. Year-over-year revenue growth accelerated to 17% during the first quarter, adjusted for currency fluctuations, more than double last year’s 7% rate. The company’s more profitable advertising business is growing faster still, supporting an industry-leading 29% EBITDA margin.

This contrasts with glum expectations on Wall Street, where analysts predict roughly 5% revenue growth annually through 2030. The question is whether AI-fueled automation can bump up the pace. Early indications are positive. eBay’s Magical Listing tool builds inventory from images alone, cutting listing times and boosting new supply. Smart ad bidding should help better connect sellers with buyers. Real-time fraud detection, meanwhile, promises to flag suspicious activity before it becomes a chargeback.

eBay might not be the most hyped AI giant around, but results elsewhere are encouraging. Facebook owner Meta Platforms META.O is all-in on silicon intelligence to turbo-charge commerce. Revenue growth has picked up. Moreover, automation has been able to go hand-in-hand with cost control, data center splurges aside. Meta’s operating expenses are falling as a percentage of sales, despite a massive ramp-up in research spending.

Perhaps a better-equipped buyer than Cohen could be tempted by this potential. At a modest premium of $125 per share, eBay’s enterprise value would be $61 billion. Assume a buyout shop could muster about 6.5 times this year’s forecasted EBITDA in debt. With 10% revenue growth, a five-point margin improvement, and an exit after five years at an industry-standard 14-times multiple, the annualized return would be 17%.

That’s fine, but not astounding. It would also be disruptive to a management team that is already working on the important issues. Cohen was right that eBay can do better. It just doesn’t require paying a premium to get there.

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CONTEXT NEWS

Online auction platform eBay said on May 12 it was rejecting a $55.5 billion takeover bid from video-game retailer GameStop. In a statement, eBay said it rejected the bid because of uncertainty around the acquisition financing, as well as leverage and operational risks from combining the two companies.