Michael Burry sold his entire position in GameStop $GME after the company's unsolicited $56 billion bid for eBay, saying the debt load required to finance the deal shattered his investment case for the stock.
Burry said the deal's leverage — potentially 7.7 times debt to EBITDA — was incompatible with his "Instant Berkshire" thesis
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Michael Burry sold his entire position in GameStop $GME after the company's unsolicited $56 billion bid for eBay, saying the debt load required to finance the deal shattered his investment case for the stock.
"I sold my entire GME position," Burry wrote in a Substack post late Monday. "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 ... As a result, GME is the first sale since I started this Substack."
Burry, who rose to fame for betting against U.S. mortgage securities before the 2008 financial crisis, had envisioned GameStop evolving into a holding company modeled on Berkshire Hathaway $BRK.B. That thesis, which he called "Instant Berkshire," could not accommodate the leverage a takeover of eBay would require, he said. At the proposed valuation, he calculated, leverage would reach about 7.7 times debt to earnings before interest, taxes, depreciation and amortization — a level he described as bordering on distressed. "Wayfair lived there for years, Carvana nearly died there and still might from such a start. Bath & Body Works $BBWI too. Those are the survivors. They are few," he wrote. "Never confuse debt for creativity."
Monday's announcement sent GameStop stock down roughly 10%, a drop that analysts attributed to doubts about whether the company could realistically pull off a transaction of this size.
GameStop's offer, put forward Sunday, would pay eBay shareholders $125 per share — split evenly between cash and stock — placing eBay's undiluted equity value at roughly $55.5 billion. That price tops eBay's most recent Friday close of $104.07 by 20%. GameStop's own market capitalization is about $12 billion.
The financing structure includes about $9.4 billion in cash GameStop held as of Jan. 31, 2026, and up to $20 billion in debt backed by a commitment letter from TD Securities, as GameStop detailed in its proposal. That still leaves a gap between available funding and the full purchase price. Ryan Cohen, appearing on CNBC Monday, declined to specify how the remaining funding would be sourced, though he acknowledged that issuing new equity was among the options available to GameStop.
Cohen, who took over GameStop in early 2021, has presided over a financial turnaround that converted a $381 million net loss that year into $418 million in net income by fiscal 2025. He told The Wall Street Journal he is prepared to take the offer directly to eBay shareholders through a proxy fight if eBay's board declines to engage, and that he intends to lead the combined company as CEO without salary or cash bonuses.
The deal requires approval from eBay's board, regulators, and shareholders of both companies.
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