Michael Burry has divested his entire position in GameStop following the company’s unsolicited proposal to acquire eBay, saying the financing behind the bid undermined the rationale for his investment. In a Substack post published Monday, the investor known for his role in the 2008 housing crash said the deal’s projected debt load was incompatible with the profile he had expected for GameStop.
Burry described his investment thesis as an "Instant Berkshire" strategy. He wrote that the acquisition financing would drive GameStop’s debt to more than five times earnings before interest, taxes, depreciation and amortization, and leave interest coverage below 4.0 times. Those metrics, he said, are at odds with the low-leverage structure he had envisioned.
The offer on the table valued eBay at roughly $55.5 billion, consisting of $125 per share in a mix of cash and stock. While that headline price represents a meaningful premium to recent market prices for eBay, Burry and others have highlighted a significant financing question given GameStop’s market capitalization of under $12 billion.
Market reaction was swift. Shares of GameStop fell about 10% on Monday after news of the proposal and Burry’s announcement of his exit.
Burry emphasized that turning GameStop into a conglomerate resembling Berkshire Hathaway had not required the high levels of leverage implicit in the eBay bid. "Instant Berkshire did not contemplate anywhere near 5x+ leverage," he wrote, adding the cautionary line: "Never confuse debt for creativity."
He estimated the transaction could push leverage to approximately 7.7 times debt to EBITDA. In his post, Burry pointed to other companies that had encountered difficulty under similarly elevated debt burdens, naming Wayfair, Carvana and Bath & Body Works as examples of firms that had struggled when leverage rose to comparable levels.
The details of how GameStop would finance the proposed purchase remain the central question raised by the submission of the offer. Burry’s public sale underscores investor concern about the compatibility of heavy leverage with a strategy premised on durable, conservatively financed ownership of operating businesses.
For now, the market is left weighing the premium offered for eBay against the structural changes to GameStop’s balance sheet that the deal would require, and monitoring whether the company proceeds with the bid or revises its approach to financing.