Michael Burry Exits GameStop Position After Ryan Cohen Proposes $55.5 Billion eBay Takeover

Michael Burry, founder of Scion Asset Management and one of the earliest high-profile backers of GameStop, has liquidated his entire stake in the video-game retailer. The move came less than 24 hours after GameStop chairman Ryan Cohen unveiled a $55.5 billion, all-cash bid for online marketplace eBay, a proposal that would require substantial borrowing and dramatically reshape GameStop’s balance sheet.

Burry disclosed the divestiture in a Substack post on Monday evening, May 4, stating that the transaction Cohen outlined no longer aligns with what he once called the “Instant Berkshire” strategy. Burry had previously likened Cohen’s capital-allocation style to Warren Buffett’s early years at Berkshire Hathaway—patient, disciplined and funded primarily through internally generated cash. According to Burry, the newly announced deal would push GameStop’s leverage far beyond acceptable thresholds for that model.

Debt Concerns Override Original Thesis

In the post, Burry wrote that his investment premise was contingent on debt remaining below five times EBITDA and interest coverage exceeding four times. By his calculations, acquiring eBay for $125 per share would raise GameStop’s debt load to roughly 7.7 times EBITDA, a level he characterized as bordering on distressed territory. “Never confuse debt for creativity,” he warned, underscoring his view that excessive leverage erodes a company’s ability to compete and innovate.

The investor also challenged the operational rationale for the takeover. He argued that cost-cutting opportunities within eBay’s existing structure would not be sufficient to justify the size of the offer or the associated financing costs. “No amount of fat trimmed can make this deal work,” Burry asserted, signaling skepticism that synergy estimates could offset the leverage risks.

Timeline of Events

• Sunday evening, May 3: Ryan Cohen revealed the $55.5 billion bid in a statement that framed the acquisition as a chance to expand GameStop’s e-commerce capabilities and diversify revenue streams.
• Monday, May 4: GameStop shares rallied in after-hours trading, buoyed by optimism among retail investors who have repeatedly driven the stock during prior “meme” surges.
• Monday evening, May 4: Burry announced via Substack that he had sold all of his GameStop shares, the first complete exit he has made public since launching the newsletter platform.

The speed of Burry’s exit startled many market observers because he had only confirmed his renewed position in GameStop in January. At that time, he described Cohen’s stewardship as a deliberate approach that would leverage GameStop’s growing cash reserves, not its credit capacity, to pursue incremental acquisitions and organic growth opportunities.

Market Capitalization Versus Purchase Price

GameStop’s market capitalization stood near $12 billion ahead of Cohen’s announcement, meaning the proposed eBay purchase price is more than four times the buyer’s own equity valuation. Financing a takeover of that scale would likely require a sizable bridge loan and subsequent issuance of high-yield bonds, moves that could leave the combined entity highly sensitive to interest-rate fluctuations and refinancing risk.

Burry’s commentary emphasizes that leverage at the magnitude contemplated could pressure operating flexibility. Historical data from the U.S. Securities and Exchange Commission show that companies with debt-to-EBITDA ratios above seven often face credit-rating downgrades, higher borrowing costs and restricted capital-expenditure programs, all factors that can weigh on long-term competitiveness.

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Implications for GameStop Shareholders

Cohen’s reputation among retail traders as a catalyst for transformative change has been a key driver of GameStop’s volatile price movements since early 2021. His latest proposal, however, departs from prior incremental steps such as launching a digital wallet and expanding brand partnerships. The shift from organic initiatives to a highly leveraged, large-scale acquisition introduces new variables that institutional investors like Burry are evaluating closely.

While GameStop has not yet detailed the financing structure, the company acknowledged in a brief statement that it is “exploring strategic options” and will update shareholders as discussions progress. eBay confirmed receipt of the offer but has not publicly commented on whether it will engage in negotiations or seek alternative bids.

First Full Position Exit on Substack

Since starting his Substack to outline investment theses and portfolio moves, Burry had typically reported partial trims or additions to existing holdings rather than full liquidations. The wholesale exit from GameStop underscores the magnitude of his concern over the proposed transaction’s leverage profile. Market participants now await additional communication from Cohen regarding financing details, integration plans and anticipated synergies.

Broader Context in Meme-Stock Landscape

Burry’s departure arrives as several high-profile fund managers recalibrate positions in companies popular with retail traders. Recent filings show shifts in allocations across technology, media and consumer discretionary names, reflecting a market environment where sentiment can pivot rapidly on headline events. In this case, the headline is a proposed acquisition that multiplies GameStop’s enterprise risk while aiming to catapult the firm into a larger e-commerce arena.

For now, Burry has made clear that the risk profile no longer satisfies the disciplined, balance-sheet-focused framework that guided his initial investment. Whether other long-term holders reach the same conclusion may depend on forthcoming disclosures about financing terms, regulatory approvals and eBay’s response. Until those elements are clarified, the gap between Cohen’s vision and Burry’s caution defines the latest chapter in GameStop’s unpredictable story.