Burry dumps entire GameStop stake after eBay bid

Investing.com -- "The Big Short" investor Michael Burry sold his entire stake in GameStop after the company made an unsolicited offer to acquire eBay, citing concerns that the deal's heavy leverage undermined his investment thesis.

Burry announced the sale in a Substack post Monday, stating the proposed acquisition was incompatible with his "Instant Berkshire" investment case. He said the deal would push GameStop's debt to more than five times earnings before interest, taxes, depreciation and amortization, with interest coverage below 4.0 times.

GameStop offered $125 per share in cash and stock for eBay, valuing the online marketplace at approximately $55.5 billion. The proposal represents a premium to recent trading levels but raises questions about financing, given GameStop's market capitalization of less than $12 billion.

Shares of GameStop fell about 10% Monday following the announcement.

Burry believes dealmaking could transform GameStop into a version of Berkshire Hathaway. However, he said the capital structure required for the eBay acquisition was incompatible with that vision.

"Instant Berkshire did not contemplate anywhere near 5x+ leverage," Burry wrote. "Never confuse debt for creativity."

Burry said the proposed valuation would likely push leverage to roughly 7.7 times debt to EBITDA. He compared this to companies including Wayfair, Carvana and Bath & Body Works, which struggled under similar debt burdens.

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