Michael Burry says he’s given up on GameStop — and ramped up his bet against Palantir.
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“I sold my entire GME position,” the investor of “The Big Short” fame wrote in a Monday post on his Substack, adding that it was the first full position he’s exited since he pivoted from running a hedge fund to writing online late last year.
“Any which way I sliced it, the Instant Berkshire thesis was never compatible with >5x Debt/EBITDA, never ok with interest coverage under 4.0x,” he wrote.
“Instant Berkshire” is Burry’s idea for GameStop CEO Ryan Cohen to emulate Warren Buffett’s Berkshire Hathaway by “creating a portfolio of great companies that generate excess capital or float for additional investment beyond what is required for their growth.”
Burry wrote in a late April post that GameStop, JD.com, and Molina Healthcare were his three largest positions, and together made up well over a third of his personal stock portfolio.
In his late-Monday post, Burry laid out in a graphic why Cohen’s $56 billion cash-and-stock offer for eBay is a far cry from the deal he envisioned for GameStop.
He estimated the proposed acquisition would burden the combined business with a net-debt-to-profit ratio of 5.2 times, and its yearly profits would only be 2.5 times its annual interest expense.
Moreover, he projected that if eBay pushes back and demands $65 billion, then the business could wind up with 7.7 times leverage and a profit-to-interest ratio of 1.2 to 1.5 times.
Burry said in an earlier post on Monday that leverage above 5 times was a “knife edge,” and 7.7 times was “a level of debt that borders on distressed.”
Burry added to his short bets
In his late-Monday post, Burry said that he “opened an outright short” on Palantir ahead of its Monday earnings, adding that he’s “shorting the company because it is worth low double digits at best.”
Burry said he’s not only betting against Palantir because he believes it’s overvalued: “I am shorting the business model. I am shorting the entire premise upon which the company rests. I am shorting the CEO.”
Palantir shares rose about 1% on Monday, but were trading slightly lower in Tuesday’s premarket. They’ve soared roughly 800% since the start of 2024, catapulting the company’s market capitalization to $350 billion.
Burry shared that he purchased more bearish put options on the iShares Semiconductor ETF (SOXX), which tracks chip stocks including AMD, Broadcom, Micron, Nvidia, and Intel.
He attached a chart showing how the exchange-traded fund has rocketed upward in recent years.
“What a rally, a true cherry on top of a decade+ explosive run,” he wrote. “I am happy being short every single one of those names at current valuations and at this stage of the cycle.”
Burry also said he bought additional puts on the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 — a tech-heavy index that counts Nvidia, Tesla, and Meta among its 10 largest constituents.
The investor — who shot to fame after his prescient bet against the mid-2000s housing bubble was featured in the book and movie “The Big Short” — also said he purchased fresh puts on Nvidia stock.
“Nvidia remains one of the cheaper ways to short the AI data center bubble because of the continued near-unanimous positive view of Wall Street,” he wrote.
Burry said the newly purchased puts had strike prices well below the market price, and would expire next spring, signaling that he expects prices to fall sharply by then.
He wrote that his puts on SOXX, QQQ, Palantir, Nvidia, and Oracle make up nearly 7% of his portfolio, and outright shorts on Palantir and Tesla account for another 2.5%.
Burry, GameStop, Palantir, and Nvidia didn’t immediately respond to requests for comment outside of normal business hours.
