Michael Burry, known for his role in "The Big Short," has sold his entire stake in GameStop. This decision came after the company made a high-profile offer to acquire eBay. Burry stated that the highly leveraged nature of the proposed deal fundamentally broke the investment thesis that had made him a long-term bull on the company.

In a post on his Substack column Monday evening, Burry announced, "I have sold my entire GameStop position."

"From any angle of measurement, the investment logic I held—the 'instant Berkshire' thesis—cannot accommodate a Debt/EBITDA ratio exceeding 5 times, nor can it tolerate an interest coverage ratio below 4 times... Consequently, this marks the first sell action I have taken since starting my Substack column," he explained.

GameStop initiated an unsolicited, non-binding proposal to acquire eBay, offering a mix of cash and stock valued at $125 per share. This values eBay at approximately $55.5 billion. The offer represents a significant premium to eBay's recent stock price but has also raised substantial market concerns regarding the financing of such a transaction.

GameStop's own market capitalization is currently under $12 billion.

Following the announcement of the acquisition bid, GameStop's stock fell approximately 10% on Monday. This decline reflects widespread investor skepticism about the deal's feasibility and the potential immense pressure it could place on the company's balance sheet.

Burry's original investment thesis was based on the idea that GameStop could transform itself through a series of mergers and acquisitions into a smaller, Berkshire Hathaway-style investment holding company—a concept he termed the "instant Berkshire" idea.

However, the capital structure and debt levels implied by this acquisition plan represent a complete departure from this core logic.

Burry wrote, "The 'instant Berkshire' concept never contemplated leverage exceeding 5 times. Never mistake taking on debt for business model innovation."

His calculations suggest that if the acquisition proceeds at the proposed valuation, GameStop's Debt/EBITDA leverage would soar to 7.7 times, pushing it into a risk zone indicative of potential financial distress.

He cited companies like Wayfair, Carvana, and Bath & Body Works as examples of businesses that have struggled under similar high-debt burdens, noting that only a minority manage to survive such pressures.

The acquisition is structured as a 50/50 split between cash and stock. GameStop has secured a financing commitment letter for $20 billion from TD Bank.

Nevertheless, a significant funding gap remains between the available capital and the total acquisition valuation, creating substantial uncertainty about how the transaction would ultimately be financed.

GameStop CEO Ryan Cohen adopted a firm but evasive stance during a CNBC interview on Monday, declining to provide specifics and stating that all relevant information would be communicated through official company channels. He mentioned the company has flexibility to issue more stock to complete the deal but did not outline a clear financing plan.

eBay released a statement on Monday confirming it had received the acquisition proposal and indicating that its board of directors would review the offer.