GME’s proposed deal for EBAY would massively expand GME’s share count, potentially tripling it, which could drive short interest much higher.

The deal is uncertain and not accepted, and all numbers rely on current prices and assumptions; but a much higher short interest could push borrow costs higher.

Options markets are not pricing in higher borrow costs, creating potential for investors who expect higher borrow rates if the deal occurs, using synthetic shorts.

GME has made an offer for EBAY, and GME has historically been a crowded short and a frequent target of short squeeze activity. The short interest is already 15% of float, with a Crowded Score of 67.5 and 61 million shares shorted.

The challenge with the proposed EBAY acquisition is the size mismatch: GameStop’s market cap is approximately $11B, while EBAY’s is around $47B.

The deal has not been accepted, and no formal terms have been disclosed, so everything remains hypothetical and subject to change.

The proposed structure is half cash and half stock, implying roughly 440 million EBAY shares would be acquired if the deal proceeds. The actual share‑exchange ratio could be calculated later, so we assume current market prices as a working baseline. Given 220 million EBAY shares and a 4.4:1 price ratio, the deal would create approximately 964 million new GME shares, compared with 448 million existing shares.

If 15% of the new GME expected were shorted by deal arbs, that would add 144 million new shorts—roughly 2.5× the current short interest—bringing the total to 205 million shares or 50% before the deal closes. At that level, borrow costs could spike sharply, although today’s rate is only ~0.30%.

Investors expecting higher borrow rates can lock in a term‑equivalent borrow using options structures.

A short stock position is economically equivalent to a short call and long put at the strike, aside from interest‑rate effects and early‑exercise risk.

Investors can short the combo and go long the stock, then unwind the position if overnight borrow rates rise.

Current mid‑market options are not pricing in elevated borrow costs for GME across any maturity. If the deal proceeds, investors can sell the stock, leaving the options position as a synthetic short.

In the event of a merger, shorting typically occurs only after the exchange ratio is defined. This ratio is often established within the merger agreement itself. However, if the agreement stipulates that the ratio is to be determined at the closing of the deal, the shorting would be deferred until that time.

Should the deal be rejected, any recent short positions initiated in anticipation of the merger would likely be covered or undone, potentially causing a squeeze.

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