TLDR
- Michael Burry has completely divested his GameStop holdings following Ryan Cohen’s announcement of a $56 billion eBay takeover proposal
- The investor cited incompatibility between the debt-financed deal structure and his fundamental investment approach
- GameStop shares plummeted more than 10% in response to the developments
- Baird’s Colin Sebastian assigns minimal odds of deal completion, pointing to strategic misalignment and structural obstacles
- Market observers anticipate eBay’s board will decline the proposal, potentially deploying shareholder rights plan defenses
Ryan Cohen’s ambitious $56 billion proposal to purchase eBay has shaken confidence among GameStop shareholders, triggering a double-digit decline in GME shares and driving one of the company’s most prominent supporters to liquidate his entire stake.
Michael Burry, the hedge fund manager whose foresight during the 2008 financial crisis was chronicled in “The Big Short,” announced via his Substack publication that he has exited his complete GME holdings. His rationale was clear: the significant debt burden necessary to finance the eBay transaction contradicts the Warren Buffett-inspired investment philosophy that initially attracted him to the stock.
“Wall Street does indeed mistake debt for creativity, and does so constantly,” Burry stated. “I of all people should have known.”
The contemplated transaction would involve GameStop purchasing eBay through an evenly split arrangement of cash and equity. The underlying premise suggests that merging these two platforms could create a more comprehensive e-commerce and collectibles enterprise.
Burry didn’t completely dismiss the strategic rationale. He acknowledged that opportunities within collectibles and secondary marketplaces could represent hundreds of billions in potential value. He indicated he does “support the effort” — though he believes the implementation challenges are too substantial for his investment parameters.
His primary objection centers on the financial architecture. He characterized certain leverage scenarios as approaching “on distressed” territory, implying the transaction would require near-flawless execution to warrant the balance sheet pressure.
Burry also voiced skepticism about deal completion, forecasting eBay will “reject GameStop’s offer out of hand.” He suggested the initiative appears motivated more by financial opportunism than authentic operational synergy.
What Analysts Are Saying
Baird’s Colin Sebastian shares similar reservations about the transaction. He places minimal likelihood on successful completion based on several considerations.
Sebastian’s primary objection questions whether the deal’s premise — that eBay must abandon its current technology-focused marketplace strategy — holds water. This assumption seems dubious considering eBay has already resumed growth momentum. Both gross merchandise volume and revenue figures align with broader e-commerce industry patterns.
His secondary concern addresses value generation. While the transaction might appear accretive through mathematical calculations, Sebastian contends this largely reflects financial maneuvering rather than authentic operational efficiencies. This dynamic generates uncertainty about sustained competitive positioning rather than reinforcing it.
He additionally highlights approval obstacles. Considering the strategic disconnect, Sebastian anticipates minimal likelihood of eBay’s board embracing the proposal. He explicitly references potential countermeasures, including shareholder rights plans.
What Cohen Is Trying to Do
Cohen’s fundamental argument centers on leveraging GameStop’s substantial cash reserves to construct an enterprise far exceeding a traditional video game retail operation. The eBay proposal aligns with this ambition — uniting two platforms with demonstrated momentum in collectibles and secondary market segments.
However, skeptics contend he may be overextending. The transaction’s massive scale, valued at $56 billion, creates tremendous execution and financing demands. Even sympathetic observers like Burry believe the margin for error is extremely thin.
GameStop has not verified whether any formal proposal has been submitted, and eBay has remained silent regarding the reported acquisition approach.
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