'Never confuse debt for creativity'
CNBC • • business
Key Points:
- Michael Burry sold his entire stake in GameStop after the company’s leveraged bid to acquire eBay conflicted with his investment thesis focused on low debt and strong interest coverage.
- GameStop’s unsolicited $55.5 billion offer for eBay, valuing eBay at $125 per share, represents a significant premium but raises concerns about financing and the company’s ability to manage the deal’s debt load.
- Following the announcement, GameStop’s shares dropped about 10%, reflecting investor skepticism about the feasibility of the acquisition and potential financial strain.
- Burry criticized the proposed deal’s leverage, estimating debt at 7.7 times EBITDA, a level he considers near distressed, citing examples of other companies that struggled under similar debt burdens.
- GameStop secured a $20 billion financing commitment from TD Bank but has yet to provide a clear plan for closing the funding gap, while eBay’s board confirmed it is reviewing the offer.
