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Michael Burry just sold his whole GameStop position. He says, "I sold my entire GME position. Any which way I sliced it, the instant Berkshire thesis was never compatible with 5x debt to EBITDA, never okay with interest coverage under 4x. I discussed this more in GameStop makes its play from earlier today.
As a result, GME is the first sale since I started this Substack. So, paper-handed Burry sold his GameStop position. And he did write this article before he sold his GameStop position. I'm not able to access it because it's locked because Michael Burry's a grifter and he's supposedly a multi-millionaire, but he has to have a paid Substack to fund whatever he's doing.
I I don't I don't really understand, but someone on Reddit actually posted the article, so shout-out to 9H day DMG. And it says, uh, "GameStop makes its play. 56 billion for eBay. Makes perfect sense." Michael Burry, May 4th, paid read an app. Never confuse debt for creativity. Oh, it says, "Make perfect sense.
Never confuse debt for creativity. When hundreds of billions are on the table, bet on craven greed." Let me blow this up a little more. So, the rumor was confirmed less than 48 hours after it was leaked. The Wall Street Journal reports GameStop is offering to buy eBay for 56 billion. Again, as you know, I have written extensively about GameStop, including just Saturday, when I speculated as to what the deal might look like.
Wait, didn't you just FOMO into the stock at like 25.50 or something like that, Michael Burry? And of course, you've been writing about GameStop. You got to get more subscribers for your Substack. What other stocks would you write about? There's no other stocks that have a following like GameStop's.
Unless you want to talk about terrible overpriced AI stocks, which we all know you don't like to talk about. Unless you're shorting them, I guess. The three times before that, the big short squeeze, final stop GameStop, and in a short thoughts February 2nd. So much for that. Uh I think we've read all of those on stream.
Now we have more information. The offer is 56 billion, 50% cash, and 50% stock. I do not believe 56 billion is anything more than an opening bid. I can only imagine eBay will reject GameStop's offer out of hand and relatively soon. Looking at the May 3rd offer, while it is extant, the offer shoulders more debt than I had thought was possible on eBay's EBITDA.
Neither does it Neither does this seem revolutionary or groundbreaking in nature. More dilution or more debt, really. The capital market strategy here could not be more ped- pedestrian. I think there's also the outcome that Ryan Cohen comes in and does a stock offering the second he takes over eBay and raises tons of money.
But either way, Ryan Cohen's going to do so much cost cutting at eBay that they're going to be pulling 7-8 billion dollars in net income a year from GameStop and eBay that I think they could pay the debt down really fast even if they don't do uh stock offering from the eBay shares. High leverage implies high growth, and eBay is growing again.
Ryan Cohen also apparently has enough credibility to get banks to go along. I contemplate a higher actual close, say 65 billion for eBay, and more like 60% cash. Below I compare this to the opening offer as well as my own, not so happening instant Berkshire creation from February 2nd. Why does Michael Burry think that it's going to be more?
Ryan Cohen's offering them a very good offer. And if they don't accept his offer, he's just going to go and take it over through the market and force a vote and then potentially get it for even cheaper. A pinch too busy, I know, but suffice it to say instant Berkshire did not contemplate anywhere near 5x plus leverage.
Well, you got to you got to do something. You can't just make GameStop into a multi-hundred-billion-dollar company because GameStop has a cap. I don't know if eBay necessarily has a cap. Maybe in 5 10 years from now eBay could be a company bringing in 15 20 billion dollars in net income a year. But GameStop GameStop has a cap on how much their business can succeed from a financial standpoint.
Obviously with no debt, you know, it'll consistently grow forever, but it's not going to grow at the pace a lot of us want it to grow. So, this is you know, this is the only way to really do it. And I don't think taking debt is necessarily a bad thing. It's risky. [clears throat] It's definitely risky, but I don't think it's a bad thing.
Especially if Ryan Cohen thinks eBay's net income is going to outperform the interest on the debt. I don't think the debt matters too much. The more likely outcome at the higher price sees leverage rise to 7.7x. A level of debt that borders on distressed and tends to strip competitiveness and innovation from such stricken companies.
Wayfair lived there for years. Carvana nearly died there. And still might from such a start. Bath & Body Works, too. Those are survivors. They are few. Ryan must see low-hanging fruit. Though if huge cash flow could be unlocked as if by a magic wand, one might expect eBay to have found it during its epic search for cash with which to buy back slag of heaps of shares.
They did 2.5 billion in share buybacks last year. You come in and stop share buybacks. That's an immediate 2.5 billion in net income going towards, you know, eBay's balance sheet or paying off the debt. And I man, I I don't know how good Michael Burry's analysis is here. eBay reduced its share count from 1.2 billion shares 10 years ago to just 444 million shares today.
One of the most prolific buyback programs markets have seen. Yeah, but eBay's assets have declined since 10 years ago. eBay was a much larger company 10 years ago. Sure, they did a bunch of buybacks, but for what? To make eBay's business worse? To make it smaller? Like buybacks are not valuable if the business is not growing.
Buybacks are only valuable if the business is growing. So, I mean, this just doesn't even matter. I really hope Ryan Cohen comes back in and does a share offering and gets rid of 10 years worth of buybacks and raises a bunch of money. Like that's what I'm hoping for. [snorts] Ryan cannot be after fat to cut if only because no amount of cut fat makes this deal work.
What rather Ryan is pointing to a transformation to hundreds of billions of dollars of opportunity. And he convinced TD to give him the 20 billion committed financing, which is no small feat given the low single-digit billion-dollar EBITDA numbers supported by these two companies. eBay today, eBay has already turned things around significantly, which no doubt will be one of the arguments made by eBay's board as it rejects GameStop's offer.
eBay's business is declining. Actually, it's not doing well because the all the stock-based compensation and the buybacks and the dividends. Sure, you know, eBay's bringing a lot of value to the shareholders and the executives, but eBay's business overall is declining for that reason. eBay has been growing faster lately.
eBay projects forward adjusted EBITDA, whatever that is, at 3.7 billion versus 2.7 billion trailing. And revenues have broken out of decade-long doldrums with 17% quarter-on-quarter growth in Q1 2026. And eBay is going to get you up in those EBITDA tranches that Ryan needs for his stock-based compensation, so you know, you're not going to get to 2, 3 billion EBITDA with GameStop, I don't think.
eBay now has eBay Live in hyper-growth mode, and collectibles is eBay's leading category. Of course, GameStop's collectible category is also growing fast. And this is where the strategies of the two seem to dovetail. eBay is not all collectibles. eBay ads grew 27% last quarter, and the company, of course, is leaning into AI.
Below from the eBay's last earnings call. We see agentic AI is a real structural tailwind for eBay, and it plays right into our core strengths. First, our innovation leveraging AI are already having a meaningful benefit for our business today. Take magical listing. We've talked about the compelling stats I've just mentioned that we're seeing, I and sellers have created 0.5 billion listings under our AI tools.
And our agentic search beta, which I realize I didn't fully answer that question, so I'll come back to that later, but what we've seen there is higher engagement and increased purchase behavior off of that early test. So, we're going to continue to bring the latest agentic technologies to eBay to make it easier for sellers to list and for buyers to buy the things they know and for buyers to find the things they love.
I see the structural change in eBay's trajectory and I believe it or not, the above scenarios give credit for projected improvements in 2026 from each of GameStop and eBay. On trailing numbers, the pro forma numbers are much worse. Think of a negotiated close at 1x EBITDA interest expense. If one considered it, one would be among the first because no one closes a deal at 1x EBITDA interest expense.
The rating agencies will of course look to trailing numbers as a base, so the final credit rating might be in the B or B- junk range, perhaps 400 to 500 basis points over SOFR, which today is 4.35%. This speaks to floating debt expense in the range of 8 to 9%. Each 100 basis point rise in SOFR would boost the interest expense 300 million.
A 300 million boost may be automatic. eBay's senior notes must be redeemed at 101 points if a change of control results in a ratings downgrade. This deal is virtually certain to trigger that put. In that case, 6.7 billion investment grade notes will be refinanced, perhaps to floating rate syndicated loans, but certainly with a 250 to 300 million increase in total interest expense.
If Ryan miraculously gets this deal at 56 billion, it works a little better. Still, tangible book value per share gets cut by 3/4, and there'll be no transformational execution risk while balancing on the knife's edge of 5x plus leverage. Competing with Amazon, think about what Amazon has become for a moment.
Amazon locks its retail prime buyers in the prime video and other benefits that none can match. A thousand plus warehouses, over 525 million square feet. Amazon has 200 plus million prime members paying $139 a year with perks such as same-day delivery, prime video, gaming, pharmacy, Whole Foods, etc.
Over 70% of its package are fully delivered by Amazon's vertically integrated logistics apparatus. 150,000 delivery vans, last mile reach matched by none. Amazon has it all and has been investing in itself at breakneck pace for decades. Current spend is in the hundreds of billions of dollars per year.
Think about what eBay is. It has none of that and is not remotely close physically or tempor- temporally. GameStop's gambit, if Ryan really wanted to compete with Amazon, he would have acquired Wayfair. Oh god, here we go. It's always got to be he should have done this. It's like, yeah, this is why you're not the CEO of a multi-billion-dollar company, Michael Burry.
This is why you run a Substack. Gosh, bro. We He would have acquired Wayfair, 70% of its own last mile deliveries and warehouses all over, along with a cash flow machine and a bunch of float. I heard someone was peddling such a deal back in early February. So, Ryan's attempt to take over eBay cannot possess the actual honest and true intentions to compete with Amazon.
Rather clearly, the intention must be to dominate collectibles and used goods for all ages. Amazon tried to do that, failed, and is not coming back. The category is a huge addressable market. Some say as high as a hundred billion. Ryan might say hundreds of billions. If GameStop wants to deal with billions of interest expense and all manners of covenants restricting its movements, it will not be breaking new ground.
It will be trotting in well-worn ruts on the road to capitalist hell. No new ground has been broken yet. To truly break new ground, Ryan has to execute and succeed in this transformation from this starting position saddled with debt. I believe Ryan believes he can do this, and I do support the effort.
As well, I do not predict failure, although it is certainly in the realm of a possibility. Of course, as I have said, I can think of many, many other ways this could have gone easier. The list above shows some big drops since February in some very good companies. The Big Bang ADP W A Go trifecta in aggregate would likely be 4 billion cheaper today than in early February.
To be clear, I would not have expected GameStop to buy all of Fannie Mae or Freddie a good number of shares of both as an investment. The others I see as potential takeouts in various combinations of instant Berkshires. You're just thinking too small, Barry. You're just thinking way too small. You want Ryan to acquire companies that are making like a couple hundred million if not losing money.
Like, you're just thinking way too small, my guy. It is not too late and Ryan may indeed fail at snatching eBay and might look in the above directions. Ryan Cohen's not going to do anything you're saying or anything anyone's saying on the internet. He's going to do what he thinks is best and you know, Ryan Cohen's the goat.
He's proved himself. You're just some guy that runs a Substack and you starred in a movie and everyone else is just YouTubers and Twitter writer Twitter people and Reddit people. Like, none of you guys know what you're talking about. You're trying to say that your opinion is more relevant than Ryan Cohen's.
Okay. Okay, you need to stop huffing your farts, bro. A little bit too high on your farts. [sighs] Still, at the end of the day, this play for eBay makes perfect sense. Wall Street does indeed mistake debt for creativity and does so constantly. Wait, what are you talking about? GameStop's down massive today.
Wall Street hates debt and dilution. I of all people should have known. Charlie Munger once said, "When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact." I mean, Charlie Munger's a smart guy, but uh I don't know.
I don't know, man. Charlie Munger's not all-knowing. I think Ryan Cohen's potentially way more intelligent than even Warren Buffett. [snorts] I may not last a week with my GameStop position fully intact. I will certainly sell to an extent, perhaps all or some, but alas, know not none. Until next time.
And then he ends up selling his whole position for a loss. Oh man. Michael Burry is such a grifter, bro. He's just riding the wave so he can get some subs for his Substack. That's crazy, bro.
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