Michael Burry sells whole stake in surging meme-stock large

Ryan Cohen spent Sunday night (Might 3) saying a $55.5 billion bid for eBay. By Monday night time (Might 4), probably the most credible worth investor in GameStop’s nook had offered each share he owned.

Michael Burry didn’t depart quietly. He defined precisely why. And his phrases are price studying rigorously.

What Burry stated about GameStop on Substack

“I offered my whole GME place,” Burry wrote in a Substack publish Monday night, in line with CNBC. “Any which method I sliced it, the Immediate Berkshire thesis was by no means appropriate with greater than 5x Debt/EBITDA, by no means comfortable with curiosity protection below 4.0x.”

He closed with a line that may observe this deal for a very long time. “By no means confuse debt for creativity,” Burry wrote, CNBC confirmed.

Fund supervisor buys and sells

He additionally challenged the strategic logic instantly.

“Ryan can’t be after fats to chop, if solely as a result of no quantity of reduce fats makes this deal work,” he stated, in line with Sherwood News.

The publish represents the primary time Burry has absolutely offered a place since launching his Substack.

What the “Immediate Berkshire” thesis was

To know why Burry’s exit issues, you need to perceive what he was initially shopping for. In January, Burry disclosed he was accumulating GameStop shares and explicitly in contrast Ryan Cohen’s capital allocation strategy to Warren Buffett‘s early Berkshire Hathaway playbook, in line with MarketDash.

Affected person, opportunistic, and powered by a rising money pile reasonably than borrowed cash.

Burry known as that thesis “Immediate Berkshire.” The thought was that Cohen would compound capital slowly, make disciplined acquisitions, and construct a sturdy enterprise with out stretching the balance sheet.

That was the model of GameStop Burry believed in. It’s not the model Cohen introduced Sunday night time.

A $55.5 billion supply for eBay from an organization with a market cap of roughly $12 billion shouldn’t be affected person capital allocation. It’s an aggressive leveraged guess. And Burry’s math on what that guess really prices is blunt: at $125 per share, the deal would push leverage to roughly 7.7 instances debt to EBITDA, a degree Burry described as “bordering on distressed,” in line with CNBC.

Why the leverage math troubles Burry

Burry’s framework shouldn’t be merely that he dislikes debt. It’s that he believes extremely leveraged corporations lose the factor that makes them aggressive. “The extra possible final result on the increased value sees leverage rise to 7.7x, a degree of debt that borders on distressed and tends to strip competitiveness and innovation from such-stricken corporations,” he wrote, in line with Stocktwits.

He cited Wayfair, Carvana, and Tub and Physique Works as cautionary examples of corporations that survived excessive leverage.

“These are the survivors. They’re few,” he wrote, Sherwood News noted. Burry additionally stated he would have most popular GameStop to pursue Wayfair, which he described as a extra acceptable goal with last-mile supply infrastructure and money circulation.

He additionally expects Cohen’s $125 bid to be simply the opening quantity. Burry believes eBay’s board will reject the preliminary supply and that the revised deal will contact $65 billion, in line with Stocktwits. That will pressure GameStop’s funds even additional than the present proposal.

How GameStop’s inventory reacted

GameStop shares fell roughly 10% on Might 4 following the eBay announcement, in line with CNBC. That’s GameStop’s largest intraday fall in 10 months, in line with Stocktwits. The market was not celebrating Cohen’s ambition. It was pricing within the danger that comes with an organization roughly one-fifth of eBay’s dimension attempting to soak up it.

Cohen addressed the financing skepticism in a CNBC interview Monday, saying GameStop has flexibility to subject fairness. Burry’s response to that framing, embedded in his Substack publish, was pointed. He described the capital markets strategy behind the bid as “pedestrian,” not inventive, Sherwood News confirmed.

Key figures from Burry’s exit and the GameStop-eBay state of affairs:

• Burry’s actual exit assertion: “I offered my whole GME place,” the primary full sale since his Substack launch, in line with CNBC

• Burry’s leverage threshold: by no means appropriate with greater than 5x Debt/EBITDA or curiosity protection below 4.0x, CNBC confirmed

• Projected leverage at $125 per share deal: roughly 7.7x debt to EBITDA, bordering on distressed, in line with Stocktwits

• Burry’s revised deal estimate: $65 billion if eBay’s board rejects the opening bid, Stocktwits noted

• GameStop market cap at time of bid: roughly $12 billion, in line with Yahoo Finance

• GameStop inventory decline on Monday: roughly 10%, its largest single-day drop in 10 months, Stocktwits confirmed

• Burry’s most popular different goal: Wayfair, which he stated affords last-mile supply infrastructure and money circulation with out the identical leverage danger, in line with Sherwood News

What this implies for Ryan Cohen’s credibility

Burry was not only a shareholder. He was probably the most credible institutional voice within the bullish camp. His January thesis gave GameStop a legitimacy that separated it from the meme-stock narrative. A distinguished short-seller-turned-value-investor holding GameStop as a Berkshire-style compounding story was a narrative the market might inform with a straight face.

That story ended Monday night time. Burry’s exit doesn’t kill the eBay deal. However it does take away the mental scaffolding that made GameStop appear like a price proposition reasonably than a speculative car. Cohen now has to make the case for his bid with out the assist of the investor whose thesis most clearly legitimized his management.

The tougher downside is what Burry’s framework reveals in regards to the bid itself. If probably the most disciplined worth investor who believed in Cohen’s imaginative and prescient concluded that this particular deal crosses an uncrossable line on leverage, the query for remaining shareholders is whether or not they share that line or are keen to observe Cohen previous it. The reply to that query will form how this story ends.

Related: Michael Burry buys beaten-down mega tech stock

This story was initially printed by TheStreet on Might 5, 2026, the place it first appeared within the Investing part. Add TheStreet as a Preferred Source by clicking here.