Burry Exits GameStop as He Sours on Cohen's Mega-Deal Strategy

What happened

Michael Burry, the 'Big Short' investor, sold his GameStop stake this week, explaining on his Substack that he had hoped CEO Ryan Cohen would pursue a less debt-heavy and dilutive deal. This departure comes as GameStop's stock has been buoyed by Cohen's unsolicited $56 billion bid for eBay, a move that would heavily leverage the company's balance sheet and dilute existing shareholders. Burry's exit signals that even prominent bullish voices see the current strategy as too risky, aligning with the DeepValue report's 'Wait' rating given the heavy reliance on a single, high-conviction catalyst. The report underscores that GameStop's core retail business continues to shrink, with FY2025 sales down 5.1%, and the real upside hinges on observable deal progress (e.g., Schedule 13D filings) rather than operational improvement. Meanwhile, the Bitcoin covered-call program remains a sleeper risk, with $368.3 million in digital-asset receivables and potential rehypothecation exposure that could compound losses if the eBay deal falters.

Implication

Burry's sale reduces the roster of credible, value-oriented backers, leaving GameStop's stock driven largely by speculative meme-stock momentum and hope for a transformative deal. The DeepValue report warns that even if the eBay transaction advances, the proposed $56 billion price tag would require significant debt and dilution, pressing shares much lower than current levels if not executed perfectly. A bullish turn would require visible milestones like a Schedule 13D filing and HSR clearance within 60 days, but without those, the stock's $26.5 price has limited fundamental support from a shrinking retail base. The Bitcoin derivative program adds opaque tail risk; a sudden loss in that portfolio could accelerate selling if management's capital allocation confidence wavers. Ultimately, the prudent move is to wait for concrete deal evidence—or a lower entry near $20 where the downside from a failed deal is better compensated.

Thesis delta

The prior thesis gave GME a 'Wait' rating, pricing in optionality on a transformational catalyst. Burry's exit introduces a prominent skeptic, reducing the probability that the current strategy succeeds. Given that even a known supporter sees the eBay bid as too risky, the thesis should tilt more bearish, requiring a higher risk premium and perhaps a lower attractive entry price.