GameStop‘s mysterious financing letter underpinning its audacious $56 billion bid for eBay is emerging as a central issue in the proposed takeover, as questions mount over whether the deal is actually financeable.

The video game retailer said it has lined up a $20 billion financing commitment from TD Securities, part of TD Bank. But a key condition attached to this letter could ultimately make or break the deal: the combined company would need to maintain an investment-grade credit profile, CNBC’s David Faber reported, citing people who have seen the document.

Moody’s Ratings said Wednesday the proposed acquisition would be “credit negative” for eBay because of the substantial increase in leverage implied by the deal structure.

The ratings agency estimated leverage for the combined company could approach nine times debt to earnings before interest, taxes, depreciation and amortization before accounting for any cost-saving synergies.

That level of indebtedness would likely push the combined company below investment grade, potentially undermining a key condition attached to the TD financing package.

The proposed takeover has raised immediate questions about how GameStop could fund a deal of that size. The video game retailer’s market value of roughly $11 billion is only a fraction of the transaction’s implied value.

CEO Ryan Cohen offered limited clarity on the structure other than saying his company has the ability to issue additional stock in order to get the deal done.

EBay confirmed that it received the offer in a statement Monday, and said its board would review it.

Semafor reported on the mysterious letter Wednesday.

GameStop has laid out a a massive, all-or-nothing equity incentive for Chairman and CEO Ryan Cohen that will only pay out if the video game retailer’s stock and profits soar to levels far beyond anything it has achieved to date.

The board of GameStop granted Cohen performance-based stock options tied to a $100 billion market-capitalization target and $10 billion in cumulative earnings before interest, taxes, depreciation and amortization, according to a statement released Wednesday.

Under the terms of the plan, Cohen receives nothing unless the minimum thresholds are met, and there is no partial credit if targets are missed. If GameStop fails to reach at least $20 billion in market capitalization and $2 billion in cumulative EBITDA, none of the options will vest.

GameStop shares slid 36% last year and the company currently has a market cap of $9.3 billion. The company reported a net income of $77.1 million in the third quarter.

If Cohen hits the goals, the total award will be for stock options to purchase 171,537,327 shares of GameStop’s Class A common stock at a price of $20.66 per share.

Cohen, who joined the board in January 2021 and later became CEO, has been the central figure in GameStop’s post-meme-stock transformation.

The company has made a few moves aimed at broadening its business beyond physical video-game sales, including an expansion into collectibles, trading cards as well as buying bitcoin aggressively with its corporate cash. What remains absent, however, is a clear master plan for how those initiatives translate into the scale of growth implied by the compensation targets.

The compensation structure, the company said, is intended to align Cohen’s incentives directly with long-term shareholder returns by tying his compensation entirely to what it called “extraordinary growth.”

GameStop CEO and billionaire investor Ryan Cohen has increased his personal stake in Chinese e-commerce giant Alibaba to roughly 7 million shares worth about $1 billion, The Wall Street Journal reported Thursday.

Citing people familiar with the matter, the Journal said the sizable stake in Alibaba is a bullish bet on China’s economic growth in the long run.

Cohen wasn’t immediately available when CNBC reached out for comment.

The news came after the Chinese titan posted a sharp profit hike in the December quarter amid strength in its Cloud Intelligence unit and e-commerce segment. Shares of Alibaba surged 8.1% on Thursday.

In 2023, the investor urged Alibaba to increase buybacks as he believed the stock was severely undervalued, the Journal said.

Alibaba’s outspoken founder, Jack Ma, who has largely kept out of the public eye since 2020, was among the entrepreneurs who attended a rare closed-door meeting headed by Chinese President Xi Jinping on Monday, during which the Beijing leader urged private businesses to “show their talents” and strengthen their confidence in a “new era” for their activity.

Cohen became CEO of meme stock GameStop after his involvement in the video game retailer partly triggered a historic trading mania on Wall Street in 2021. The investor, who co-founded Chewy, has been leading a turnaround in the brick-and-mortar retailer over the past few years.

Under Cohen’s leadership, GameStop has focused on cutting costs and streamlining operations to ensure the business is profitable even though it is not growing. Earlier this month, CNBC reported GameStop was considering investing in bitcoin and other cryptocurrencies.

— Click here to read the WSJ story.

Shares of GameStop and MicroStrategy were on the rise Monday after Ryan Cohen, CEO of the video game retailer, posted a photo with Michael Saylor, co-founder and chairman of the largest corporate holder of bitcoin.

GameStop, day traders’ favorite meme stock, climbed more than 7%, while MicroStrategy, which recently rebranded as “Strategy,” saw shares rising as much as 4%. Cohen uploaded the photo over the weekend on X, sparking speculation that GameStop is plotting another strategy around crypto. MicroStrategy shares last traded up 1%.

The video game company had expanded into digital services in recent years by offering crypto wallets that let users manage their crypto and nonfungible tokens. However, the firm shut the service down in 2023, citing “regulatory uncertainty.”

Cohen, co-founder of Chewy, bought shares in GameStop in 2020 and joined the board in 2021 as GameStop became one of the key stocks in the WallStreetBets meme trading mania.

His e-commerce experience fueled hopes that he could help modernize the brick-and-mortar retailer, but the company still struggles to adapt to changing spending habits by gamers. Trading in the stock remains highly volatile and speculative as meme stock personality “Roaring Kitty” continues to spur buying from retail investors.

Saylor’s Strategy also has a fan base of retail investors as the firm touted its aggressive bitcoin-buying strategy. In the past year, the firm has raised billions of dollars through the sale of stock or convertible bonds for the sole purpose of purchasing more bitcoin.

Last week, Strategy said it’s almost halfway to its ambitious capital-raising goal as it went on a buying spree throughout the postelection rally. As of Monday, Strategy holds roughly $47 billion worth of bitcoins on its balance sheet, about 2.5% of the total supply.

Real estate has been historically slow to modernize, but AI is changing that. The integration of artificial intelligence is transforming how buyers and sellers interact with agents, fundamentally altering competitive dynamics in the industry. 

With AI reshaping daily operations of a real estate agent’s business by automating tasks — from generating property listings to conducting neighborhood analyses — the agent’s focus in day-to-day activities will shift. 

Ryan Serhant, CEO of Serhant and reality TV star of “Owning Manhattan,” says AI is already making real estate less about access to information and more about the agent building deeper relationships. He predicts a mindset shift is on its way as agents leverage AI and at the same time are forced to find new ways to differentiate themselves in an increasingly competitive market. “If we are all using AI and have the same level of expertise, who wins? It’s the game of attention,” said Serhant at the CNBC Evolve AI Opportunity Summit in New York City this past week. 

Buying a home is the single largest investment most Americans make in their lives, which makes real estate a business where greater success can be achieved with greater personal touch on the part of the agent. Serhant says the big advantage he sees in use of AI is having more time for the real estate agent to provide personalized attention to their clients. 

“The product in sales is no longer just the skill set,” Serhant said. “It is the attention to the skill set.”

His own company, Serhant, has developed a service called “Simple” for sales automation to handle daily tasks in customer relationship management, which typically consumes over 60% of agents’ time. 

AI tools are being used to streamline lead generation, automate marketing campaigns, and provide predictive analytics to identify opportunities, but that is not replacing the critical role of the agent in providing top performance. Serhant says AI won’t virtualize relationships, but for the real estate agents who embrace the AI revolution — which he says is a necessary move to make — it will strengthen their relationships.

Making access to real-time market data and sales insights less onerous may allow agents from small boutique firms to compete on a more equal footing with larger real estate corporations. “There is a trust factor in sales. … It isn’t about who is the largest, but who is the most empowered,” Serhant said. 

That also stands to benefit homebuyers and sellers, Serhant said, with a wider selection of suitable agents with enhanced personalized services and greater focus on the client. 

The real estate industry is still in the initial stages of adopting AI and understanding remains low among real estate professionals, but the interest is there. Generative AI was ranked among the top three technologies expected to have the greatest impact on real estate over the next three years by investors, developers, and corporate occupiers, according to JLL Technologies’ 2023 Global Real Estate Technology Survey. But the survey also finds that real estate professionals have very low understanding of AI compared to other technologies.

According to Serhant, agents who understand how AI can empower their business are going to have huge opportunities over the next 20 years to take significant market share. 

No tech innovation comes without risks, and wire fraud remains a major challenge for the real estate industry, which will be exacerbated by AI. The FBI reported a big year-over-year increase in wire fraud cybercrime losses in 2023, driven significantly by real estate transactions. Improved artificial intelligence technology is facilitating real estate scammers. 

Fraud can’t be ignored, said Serhant, but he believes real estate will adapt to the risks inherent in new technology in the same way the business has in the past, such as with digital listings. “With every advancement in technology, greater rules get put into place that can help stop those fakes,” he said. 

Convicted former FTX executive Ryan Salame’s domestic partner Michelle Bond has been indicted in New York on federal charges accusing her of conspiring to raise unlawful campaign contributions from FTX for her unsuccessful run for Congress in 2022, prosecutors announced Thursday.

Manhattan U.S. Attorney Damian Williams claims that Bond, 45, illegally funded her campaign with a “sham” $400,000 upfront payment from FTX, followed by a $100,000 annual payment from that now-bankrupt crypto exchange.

Bond was running for a House seat in New York’s first congressional district, which includes eastern Long Island.

Bond, who lives in Potomac, Maryland, is scheduled to appear in Manhattan federal court on Thursday.

The four-count indictment was unsealed a day after Salame, the father of Bond’s eight-month-old child, asked a New York federal judge to void his guilty plea to campaign finance and money-transmitting crimes.

Salame’s lawyers claim prosecutors reneged on an agreement to drop their campaign finance probe of Bond as an incentive to get him to plead guilty.

Bond was an attorney based in or near Washington who, “at all times relevant to the indictment,” worked as the CEO of a digital assets trade group, the indictment says. In June, Bond also announced the launch of Digital Future, a think tank “dedicated to promoting the development of the next generation of the financial services industry,” according to a press release.

Salame and Bond met in June 2021, and were in a relationship by early the following year, according to the indictment.

The indictment alleges that Salame, identified only as CC-1, conspired with Bond to commit the crimes, saying that Salame arranged the payment from FTX to Bond. She then allegedly used “almost entirely” all of that money “to fund her campaign illegally,” the indictment says.

Salame between June and August 2022 allegedly wired hundreds of thousands of dollars to Bond’s personal bank account, which she then also put toward illegally funding her campaign, according to the indictment.

Salame was not a cooperating witness in last year’s criminal trial of his former boss at FTX, Sam Bankman-Fried, who was sentenced in March to 25 years in prison for fraud and conspiracy.

The charges against Salame stemmed from his involvement in a multimillion-dollar campaign finance scheme during his tenure at FTX.

Salame is due to begin serving a 7-and-a-half-year prison sentence on Oct. 13. Salame also was ordered to pay more than $6 million in forfeiture and more than $5 million in restitution.

Williams, the U.S. Attorney, separately wrote to the judge in his criminal case on Wednesday to ask that the court “reject Ryan Salame’s shameless and self-serving attempt to renege on his guilty plea in the aftermath of his sentencing.”

Judge Lewis Kaplan set a hearing for Sept. 12 to hear arguments from both sides on whether to toss out the deal Salame struck with the prosecutors.

— CNBC’s Dan Mangan contributed to this report.

WATCH: Former FTX investor weighs in on SBF sentencing

Just hours after being named GameStop‘s CEO, Ryan Cohen sent out a memo to employees Thursday that emphasized he will take dramatic steps to ensure the struggling video game retailer survives.

“Our job is to make sure GameStop is here for decades to come,” he wrote in the email that was sent to corporate employees and store leaders and obtained by CNBC. “Extreme frugality is required. Every expense at the company must be scrutinized under a microscope and all waste eliminated. The company has no use for delegators and money wasters. I expect everyone to treat company money like their own and lead by example.”

Cohen, a billionaire activist investor and founder of direct-to-consumer pet food and supply retailer Chewy, was named the company’s new leader Thursday morning. He was previously executive chair of GameStop. As of late June, his firm RC Ventures was the company’s largest shareholder with a 12.09% stake, according to FactSet.

Cohen’s CEO announcement previewed the company’s emphasis on slashing costs: He will not receive a salary in his new role.

Cohen became an integral part of the “meme stock” frenzy, as he invested in companies including now bankrupt Bed Bath & Beyond. He joined GameStop’s board in 2021 in the thick of the phenomenon.

Cohen’s new role kicks off the latest chapter of GameStop’s effort to reinvent itself. The Grapevine, Texas-based retailer, which was founded in the 1980s, built its business on selling video games, consoles and other gaming merchandise.

Yet as customers buy video games online, it has fallen from relevance and had to chase new ways make money. It has experimented with new businesses, such as launching an NFT marketplace and striking a partnership with now bankrupt cryptocurrency exchange FTX.

The company has also dealt with major leadership changes. With Cohen on its board, GameStop tapped multiple Amazon veterans, including Matt Furlong, who became CEO, and Mike Recupero, who became chief financial officer.

Yet GameStop fired both of those leaders. Cohen got the top job nearly four months after the company ousted Furlong.

GameStop shares closed at $16.84 on Thursday and have fallen nearly 9% this year. The closing price was less than a quarter of its all-time high close of more than $86 a share in January 2021.

Earlier this month, GameStop reported a second-quarter net loss of $2.8 million, compared to a $108.7 million loss in the prior-year period.

—

Read the full memo below:

Subject: Survival
 
I will be straight to the point.
 
It is not sustainable for GameStop to operate a money losing business. The mission is to operate hyper efficiently and profitably. Our expense structure must allow us to endure any adverse scenario. Whether it’s a difficult economy or revenue deceleration from shrinking software, we must be profitable. Our job is to make sure GameStop is here for decades to come. Extreme frugality is required. Every expense at the company must be scrutinized under a microscope and all waste eliminated. The company has no use for delegators and money wasters. I expect everyone to treat company money like their own and lead by example.
 
Prospering in retail means survival. If we survive, we stay in the game. Survival is avoiding the deadly sins that often lead retailers to self-destruct. This is usually a result of the following – buying bad inventory, using leverage, and running expenses too high. By avoiding these self-inflicted mistakes and focusing on the basics, GameStop can be here for a long time.
 
I expect everyone to roll up their sleeves and work hard. I’m not getting paid, so I’m either going down with the ship or turning the company around. I much prefer the latter.
 
It won’t be easy. Best of luck to us all.
 
Ryan

This story is developing. Please check back for updates.

— CNBC’s Gabrielle Fonrouge contributed to this report.

GameStop said Thursday morning that billionaire activist investor Ryan Cohen would take over as the video game retailer’s chief executive, chairman and president effective immediately — and he won’t be collecting a salary.

Shares of the company jumped nearly 10% in premarket trading following the announcement.

GameStop’s board, with Cohen abstaining, unanimously voted to appoint the entrepreneur as the retailer’s top executive on Wednesday. Cohen had previously held the title of executive chairman but will step down from the role upon his latest appointment, according to a securities filing.

Cohen won’t “receive any compensation” for his work, a news release said.

The move comes more than three months after GameStop fired CEO Matthew Furlong, made Cohen executive chairman and appointed longtime company soldier Mark Robinson as its “principal executive officer” and general manager. GameStop didn’t give a reason for Furlong’s dismissal at the time, but it came just months after the company had reported its first quarterly profit in two years with Furlong at the helm.

Several weeks later, the company announced that CFO Diana Saadeh-Jajeh was resigning.

With the latest move, Cohen will also assume the role of principal executive officer from Robinson. Robinson previously served as general counsel and secretary, and he added principal executive officer to his list of duties back in June. Now, he will resume as just general counsel and secretary, according to a securities filing.

Cohen, who founded pet food retailer Chewy and has become known as the “king” of meme stocks, bought a stake in GameStop in 2020 and joined the board in 2021 – during the height of the meme phenomenon.

As of late June, his firm RC Ventures was GameStop’s largest shareholder with a 12.09% stake, according to FactSet.

Since Cohen joined the company, the business hasn’t shown many signs of a turnaround, albeit with some exceptions. Earlier this month, GameStop reported its second-quarter financial results, posting a narrower loss than it did a year ago, as well as a slight increase in revenue.

Read the release here.