Michael Burry sold his entire GameStop position Monday following the company's $55.5 billion eBay bid, which he said would saddle the firm with debt his bullish thesis could not absorb.
The 'Big Short' investor disclosed the sale on his Substack, citing debt levels incompatible with the 'Instant Berkshire' thesis he had bought into in January. Burry claimed the deal would likely push GameStop's borrowings past the limits any disciplined buyer would accept.
Burry's move comes as GameStop pursues an unsolicited, non-binding $55.5 billion offer to acquire eBay at $125 per share in a roughly even split of cash and stock. The bid draws on $9.4 billion in cash on hand alongside a $20 billion debt commitment from TD Securities.
While Burry said he 'supports the effort' behind Chairman Ryan Cohen's plan to dominate collectibles and resale, his skepticism focused on the financing. He described the capital markets approach as 'well-worn ruts on the road to capitalist Hell.'
'The Instant Berkshire thesis was never compatible with >5x Debt/EBITDA, never ok with interest coverage under 4.0x,' Burry wrote.
Ryan Yoon, senior analyst at Tiger Research, called the exit a 'cold reminder that the eBay deal is a debt-driven disaster rather than a visionary move.'
eBay shares are trading at $105.37, below the $125 offer, while GameStop is up 1.3% at $24.14.