Michael Burry Dumps GME Stake After $56B eBay Offer: ‘No Amount Of Cut Fat Makes This Deal Work’

• Burry sees GameStop’s $56 billion offer for eBay as likely just a starting bid and expects eBay’s board to reject it. 
• Burry expects the revised deal to touch $65 billion and added that it would further strain finances.
• Burry believes GameStop is targeting leadership in collectibles and resale markets through the eBay deal.

“The Big Short” investor Michael Burry has exited his entire stake in GameStop (GME), citing concerns about the company’s debt and long-term financial health after the video game retailer made a non-binding offer to buy all of online marketplace eBay. 

GameStop’s stock on Monday recorded its biggest intraday fall in 10 months after CEO Ryan Cohen confirmed that his company would buy eBay out for $56 billion in cash and stock. That value represents nearly four times GME’s own market capitalization.

Burry’s GME Exit Driven By Debt Concerns

In a Substack post, Burry, who predicted the 2008 financial crisis, said his “Instant Berkshire” idea no longer fits GameStop’s direction because its debt has grown too high for what he considers safe.

The thesis suggests that GameStop should use the cash it raised to buy other businesses rather than just holding onto the money. 

“I sold my entire GME position. Any which way I sliced it, the Instant Berkshire thesis was never compatible with >5x Debt/EBITDA, never ok with interest coverage under 4.0x.”

He said GameStop’s $56 billion offer for eBay likely represents an initial bid rather than a final agreement, and predicted that eBay’s board would reject it swiftly. He criticized the financing approach behind the proposal, saying that the deal would introduce more debt than he considers sustainable relative to eBay’s earnings. 

Burry said the strategy is not creative because it largely relies on issuing more shares or taking on debt. He also warned that a new deal could raise the value to about $65 billion, further straining the company’s finances. 

“The more likely outcome at the higher price sees leverage rise to 7.7x, a level of debt that borders on distressed and tends to strip competitiveness and innovation from such-stricken companies,” Burry said. 

Burry’s exit represents the first time he has fully liquidated a position since launching his Substack platform. “Ryan cannot be after fat to cut, if only because no amount of cut fat makes this deal work,” added Burry. 

eBay’s Improving Fundamentals

Burry also said eBay is improving, with higher sales and better earnings forecasts. He added that the company is growing in collectibles and advertising, and is using AI tools to help users and sellers work more easily and effectively. 

“eBay now has eBay Live in hypergrowth mode, and collectibles is eBay’s leading category. Of course, GameStop’s collectibles category is also growing fast, and this is where the strategies of the two seem to dovetail,” added Burry. 

Rather than positioning the deal as a challenge to Amazon’s dominance, as Cohen projects, Burry believes GameStop is targeting leadership in collectibles and resale markets.

What Are GME Retail Traders Saying? 

On Stocktwits, retail sentiment around the stock shifted to ‘extremely bullish’ from ‘bullish’ territory the previous day, with the message volume suring 1,035% in 24 hours. 

A Stocktwits user said, “Buy Buy Buy, RC knows what he is doing.  He is a pro at manipulating Wall Street,” and added, “He is counting on retail warriors to drive the stock higher and sell shares into it.”

Another user said, “I'd love to hear how Cohen would make [eBay] a bigger and better company. 

GME stock has gained over 18% year-to-date. 

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