Michael Burry Dumps GameStop — Warns $55.5bn eBay Takeover Is 'Road To Capitalist Hell'

Michael Burry is known for his contrarian stock trades and netting hundreds of millions of dollars from his bet against the US real estate market before the 2008 global financial crisis. His trade was chronicled in the award-winning movie 'The Big Short.'

In January, Burry disclosed a position in GameStop, but he has reportedly offloaded the holdings recently amid CEO Ryan Cohen's plan to acquire eBay at $125 per share or roughly $55.5 billion.

Cohen's major expansion bid is expected to be funded with $9.4 billion in cash and cash equivalents as well as $20 billion in financing, which could involve its $368 million stake in Bitcoin. Cohen's merger offer comes after GameStop moved its BTC holdings to Coinbase Prime to generate income while he described the company's expansion plans as 'more compelling than Bitcoin.'

Burry, who had purchased GameStop years earlier, before it was a meme stock, is among the most prominent bulls of the company. However, Cohen's eBay plan would mean GameStop is preparing to compete with retail giants like Amazon. Burry also believes the price offered to eBay is too high and GameStop has better acquisition targets if they are dead set on buying a company.

'I may not last the week with my GameStop position fully intact,' Burry wrote on Substack. 'I will certainly sell to an extent, perhaps all or some but alas, no, not none.'

He had earlier praised Cohen's vision and even described him as the investing world's successor to Warren Buffett, but said GameStop's plan to acquire eBay 'could not be more pedestrian.'

Burry's Concerns Over eBay Deal Financing

Burry thinks that the $55.5 billion offer is only the initial bid, and the closing price is likely to inch higher. 'Ryan cannot be after fat to cut, if only because no amount of cut fat makes this deal work,' he stated.

It could also imply that the merger would carry much more leverage, 'to a level of debt that borders on distressed and tends to strip competitiveness and innovation from such-stricken companies,' Burry explained. 'If Ryan really wanted to compete with Amazon, he would have acquired Wayfair (70% of its own last mile deliveries and warehouses all over) along with a cash flow machine and a bunch of floats.'

Burry had said earlier that Wayfair is among the companies he thought GameStop should acquire. He also explained that although the market for collectibles and used products that dominate eBay is a major one, he doesn't think GameStop's takeover bid is the best way for it to break into this segment.

'If GameStop wants to do it with billions of interest expense and all manner of covenants restricting its movements, it will not be breaking new ground. It will be trotting in well-worn ruts on the road to capitalist Hell,' Burry concluded.

Burry remains bearish on the AI narrative, with puts against tech leaders like Nvidia and Palantir Technologies, citing market trends that don't align with the fundamentals of his investment philosophy.

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