Michael Burry, known for his successful bet against the U.S. housing market, recently shared in a Substack post that he has been buying shares of GameStop. He mentioned that he expects to buy these shares at what he believes will soon be 1x tangible book value and 1x net asset value.
Burry expressed confidence in GameStop's CEO, Ryan Cohen, stating, "And getting a young Ryan Cohen investing and deploying the company's capital and cash flows. Perhaps for the next 50 years." His investment is seen as a long-term value play rather than a bet on the renewed interest in meme stocks.
After Burry's announcement, GameStop shares surged nearly 8% on Monday. The stock was last trading around $25 each, indicating that it has given back most of its gains from a previous spike.
Ryan Cohen, the CEO of GameStop, has also recently increased his stake in the company.
According to disclosures filed with the Securities and Exchange Commission (SEC) last week, Cohen purchased 1 million shares of GameStop. Burry commented on Cohen's leadership, stating, "Ryan is making lemonade out of lemons. He has a crappy business, and he is milking it best he can while taking advantage of the meme stock phenomenon to raise cash and wait for an opportunity to make a big buy of a real growing cash cow business."
This reflects Cohen's strategy of capitalizing on the company's current situation to strengthen its financial position.
Over the past few years, GameStop has raised billions through equity offerings, building a significant cash reserve.
The company has also ventured into buying Bitcoin, a move that aligns with broader market trends. Burry acknowledged this strategy by stating, "I do not know about this Bitcoin thing, but I cannot argue with what has been done so far." This indicates Burry's recognition of Cohen's approach to navigating the company's challenges while preparing for future growth opportunities.
With Burry's backing and Cohen's ongoing investments, GameStop may be positioned for a potential turnaround. However, the company still faces challenges, including its classification as a 'crappy business' by Burry.
As both investors express confidence in the company's long-term strategy, it remains to be seen how GameStop will leverage its cash reserves and navigate the evolving retail landscape.
