Michael Burry has gone sour on GameStop (GME) after the video game retailer made an unsolicited $56 billion bid for online marketplace eBay.
“Wall Street does indeed mistake debt for creativity, and does so constantly,” Burry wrote in a Substack post on Monday. “I of all people should have known.” He said that he sold his entire GME position.
The investor made famous by the film “The Big Short” compared the debt GameStop would take on to the leverage of Wayfair (W) and Carvana (CVNA), companies that nearly collapsed.
The sentiment is a reversal of Burry’s support for GameStop: He had previously said GameStop could pursue the path of an “Instant Berkshire” and become a conglomerate, similar to Berkshire Hathaway (BRK-B), a holding company that buys smaller companies at discounted valuations.
“So much for that,” wrote Burry.
GameStop stock rebounded 3% on Tuesday after falling as much as 10% in the prior session amid questions over the deal’s underlying math and an awkward CNBC interview with chairman and CEO Ryan Cohen.
As for Cohen’s stated goal to make the combined company more efficient Burry said, “Ryan cannot be after fat to cut, if only because no amount of cut fat makes this deal work.”
Burry also dismissed the idea that a combined company would compete with e-commerce giant Amazon (AMZN), which has “been investing in itself at a breakneck pace for decades.”
“Think about what eBay is. It has none of that and is not remotely close physically or temporally,” he noted.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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