GameStop Corp. shares fell sharply Monday after the video game and collectibles retailer announced a private exchange of approximately $1.4 billion in convertible senior notes for common stock, a move that reduces long-term debt without using cash but increases the number of shares outstanding.

The stock traded down more than 11% in morning action, reflecting investor concerns over dilution even as the company continues its high-profile pursuit of eBay Inc. The exchange involves about $400 million of 0.00% notes due 2030 and $1.0 billion of notes due 2032. Noteholders will receive newly issued Class A common shares based in part on the stock’s average volume-weighted average price over a 35-trading-day period that began Monday, subject to a per-share floor. The transaction is expected to close around September 23, subject to customary conditions.

GameStop will not receive cash proceeds from the issuance. Upon completion, the exchanged notes will be canceled, cutting outstanding long-term debt by roughly $1.4 billion and leaving approximately $1.1 billion of the 2030 notes and $1.7 billion of the 2032 notes outstanding. The company described the deal as retiring debt without the use of cash.

The announcement comes amid GameStop’s ongoing campaign to acquire eBay. In early May, the company delivered a non-binding proposal to buy all outstanding eBay shares it does not already own at $125 per share in a mix of cash and GameStop stock, valuing the e-commerce platform at roughly $55 billion to $56 billion. eBay’s board rejected the offer, calling it neither credible nor attractive and citing questions about financing, management of a combined company and other terms.

GameStop has since substantially increased its ownership. It now holds approximately 43.4 million eBay shares, or about 9.8% of the company, after converting derivative positions and making open-market purchases. Chief Executive Ryan Cohen has repeatedly signaled determination to press forward. In comments following the stake increase, Cohen said, “we’re coming for eBay one way or another.”

Shareholders earlier approved an increase in authorized Class A common shares to 2.5 billion, providing additional flexibility for potential stock-financed transactions. Cohen also withdrew a previously approved CEO performance award, with the company stating it was focusing on the eBay opportunity. GameStop has pointed to its cash position, a non-binding commitment letter for up to $20 billion in debt financing from TD Securities contingent on investment-grade ratings for a combined entity, and its retail network as elements that could support a deal.

In late June, GameStop provided a fiscal 2026 outlook expecting adjusted EBITDA in excess of $600 million, up from $345.4 million in fiscal 2025. Management has framed the eBay pursuit as a strategic expansion that would combine GameStop’s physical retail footprint and growing collectibles business with eBay’s global marketplace platform, authentication capabilities and seller network.

The debt-for-equity exchange improves the balance sheet by lowering leverage at a time when the company is positioning itself for a potentially transformative acquisition. However, the issuance of new shares dilutes existing holders, a dynamic that typically pressures the stock in the near term. Market reaction Monday underscored that tension: while the reduction in debt is viewed as positive for credit metrics and future financing capacity, the increase in share count raised questions about ownership stakes and potential further equity issuance if a deal advances.

GameStop has been transforming its business model in recent years. Physical video game software sales have declined as digital distribution grows, but collectibles, trading cards and other categories have expanded to represent a larger share of revenue. The company has also explored partnerships, including delivery services, and maintained a significant cash reserve that has supported both share repurchases and the accumulation of the eBay stake.

eBay, for its part, has emphasized its own turnaround efforts and independent strategy. The marketplace operator has focused on improving its platform, expanding categories and returning capital to shareholders. Any potential combination would face regulatory review, financing hurdles and integration challenges given the scale difference between the two companies.

Analysts and investors will watch several developments in the coming weeks. These include the final share count issued in the notes exchange, any further updates on the eBay proposal or negotiations, quarterly operating results, and broader market conditions for meme-associated and retail stocks. GameStop’s ability to convert its eBay stake and financing commitments into a completed transaction remains uncertain, particularly after the initial rejection.

The sharp decline in GameStop shares on the exchange news highlights the market’s sensitivity to dilution even when paired with balance-sheet strengthening. At the same time, the company’s continued accumulation of eBay shares and public comments from leadership indicate the acquisition effort is far from abandoned. Whether the debt reduction ultimately bolsters credibility for a larger deal or simply reflects prudent capital management will depend on subsequent steps by both companies.

As trading continued Monday, the focus remained on how GameStop balances near-term shareholder dilution against longer-term strategic ambitions in a rapidly evolving retail and e-commerce landscape. The outcome of the eBay pursuit, if it advances, would rank among the most significant corporate moves in the company’s recent history.

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