Recently, the stock popped on a rare piece of good news. Michael Burry, the famous hedge fund manager portrayed by Christian Bale in The Big Short, revealed last week that he’s long GameStop. His fund, Scion Asset Management, owns roughly 3% of its outstanding shares.
Burry rose to national fame as one of the first investors to bet against the housing market in the mid-2000s. He’s one of the most brilliant contrarian investors of our time. But that doesn’t mean every call he makes is right — and this one looks pretty wrong.
His investment thesis is largely centered on GameStop’s balance sheet — which is, for the moment, surprisingly strong. The firm has a relatively low debt-to-equity ratio of 36.3%, for example.
That, however, is almost certain to change as GameStop burns through its remaining cash on share buybacks and other ineffective investor relations stunts. The firm is now losing more money per share than it ever made, even during its peak years.
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