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........

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