GameStop (GME) Shares Plunge 10% After Michael Burry Dumps Stake Over eBay Deal Concerns

Key Takeaways

• Michael Burry has liquidated his complete GameStop stake following Ryan Cohen’s $56 billion eBay acquisition proposal
• The ‘Big Short’ investor expressed concern that excessive debt and share dilution contradict his initial investment rationale
• GameStop shares plummeted over 10% in response to the developments
• Investment analyst Colin Sebastian from Baird assigns minimal odds to deal completion, highlighting strategic misalignment
• Industry observers anticipate eBay’s board will turn down the proposal, with defensive strategies like poison pills under consideration

Ryan Cohen’s ambitious $56 billion eBay takeover proposal has triggered significant turbulence among GameStop shareholders, driving GME down over 10% and causing one of its most prominent investors to completely exit his stake.

GameStop Corp., GME

Michael Burry, whose investing prowess was chronicled in “The Big Short,” announced via his Substack publication that he has completely divested from GME. His explanation was direct: the significant debt burden necessary for the eBay transaction contradicts the Warren Buffett-inspired investment philosophy that initially attracted him to the stock.

The contemplated transaction would have GameStop purchase eBay through an evenly split combination of cash and equity. The underlying rationale centers on merging both platforms to create an expanded e-commerce and collectibles enterprise.

Burry did concede the strategic vision carries certain appeal. He recognized that opportunities within collectibles and secondary marketplaces could reach hundreds of billions in value. He indicated he does “support the effort” — though execution challenges present too much risk for his investment approach.

His primary apprehension centers on 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 viability, forecasting eBay will “reject GameStop’s offer out of hand.” He characterized the initiative as motivated primarily by financial engineering rather than authentic strategic alignment.

Wall Street’s Perspective

Baird’s Colin Sebastian shares similar doubts about the transaction. He estimates minimal likelihood of success based on several fundamental concerns.

Sebastian’s initial objection centers on the assumption that eBay requires a departure from its existing technology-focused marketplace approach — a debatable premise considering eBay has already achieved renewed growth momentum. Gross merchandise volume and revenue figures align with broader e-commerce sector patterns.

His secondary worry involves value generation. While the transaction might appear earnings-accretive theoretically, Sebastian contends this reflects financial maneuvering rather than genuine operational benefits. This dynamic creates uncertainty about sustained competitive positioning rather than reinforcing it.

He additionally highlights the approval obstacle. Considering the strategic disconnect, Sebastian anticipates minimal probability that eBay’s directors will embrace the proposal. He explicitly references potential countermeasures, including shareholder rights plans.

Cohen’s Strategic Vision

Cohen’s fundamental argument centers on deploying GameStop’s substantial cash reserves to construct something far beyond a traditional video game merchant. The eBay overture aligns with this blueprint — uniting two platforms with demonstrated strength in collectibles and resale markets.

However, skeptics contend he may be overreaching. The transaction’s sheer magnitude, $56 billion, creates tremendous execution and financing pressure. Even advocates like Burry acknowledge the margin for error is slim.

GameStop has not verified whether any official proposal has been submitted, and eBay has remained silent regarding the rumored overture.

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