Michael Burry replayed his Gamestop bet on Monday’s Substack post.
A “big short” investor wrote that 2021 was a “captive business” with a “bell of the ball”.
Burry sold before the meme-stock boom because he was “blindsided” by the risk and saw little payoff.
When it comes to regrets, Michael Burry has a few.
The investor of “The Big Short” fame, who bet on GameStop years before it became a meme, explained why he sold the stock before it soared in a substack post Monday night.
Bury, a recent hedge fund manager-turned-online writer, first invested in GameStop in the summer of 2018. The video-game retailer’s stock seemed undervalued to him, and he saw an array of catalysts that could send it higher, he wrote.
They include a console refresh in 2020, the possibility of a buyout, a potential sale of the Spring Mobile business, and the opportunity to offer strong cash flow and a large cash pile for “very large and consequential buybacks,” Bury wrote.
He stepped down in the second quarter of 2019 after the stock failed to decline. But he reinvested in July 2019, buying the stock “with both hands” and making it one of his larger holdings, as higher short interest offered a new catalyst, he wrote.
Do you have any investment regrets like Michael Burry’s GameStop miss? Share them with this reporter at tmohamed@businessinsider.com
“I went to a GameStop store to make sure I wasn’t crazy,” Burry wrote. “It didn’t work. It looked like stuff that wasn’t on sale should be on sale.”
Bury wrote to GameStop’s board to push for changes at the company. He shared that his public activism has garnered emails from Keith “Roaring Kitty” Gill, a retail investor who would become the face of GameStop Meme Mania, and Chewy cofounder Ryan Cohen, who would become GameStop’s CEO.
Burry said he bought GameStop a second time at a split-adjusted average price of 83 cents, or less than 1/26 of the current $22 stock price.
He bought about 5% of the shares and held it for more than 16 months. “Most of the time, I traded my shares at very good rates — in the high double digits — that were attractive and a huge part of the business,” he wrote.
Burry cashed out by the end of November 2020, selling his shares for an average of $3.38 each, or more than four times what he paid.
Weeks later, retail investors on forums like r/WallStreetBets executed a historic squeeze on GameStop short sellers, sending the stock to an intraday high of more than $120 on January 28, 2021.
“At its peak my years of investing could have turned $12 million into $1 billion, but that was never a possibility,” Burry wrote, noting that he had sold long before that point.
Burry — best known for predicting and profiting from the housing crash before the 2008 financial crisis, a story told in the book and movie “The Big Short” — reflects on whether he should have played his hand differently.
“I could have analyzed that situation better,” he said. “I knew GameStop inside and out, and I thought I understood volume, short interest, and other dynamics. However, I was blindsided by what I saw as execution risk.”
He also lost faith in a big stock rebound. “Also, I’m human,” he wrote, noting that large-scale purchases, board changes, and sales of Spring Mobile have been “successful home run/slam dunk acts with solid results but zero impact on price or short interest.”
Burry had an opportunity to close his bet when GameStop shares rose after Cohen disclosed his stake.
“I had no idea what was coming,” he wrote. “I didn’t know a thunder kitty existed.”
“And I had no idea that widely distributed gamma rays would make needles the only legal market corner,” he added.
About 50 days after he got out, that “disgraceful bad business” became “the bell of the ball,” Bury wrote. “The whole world couldn’t take its eyes off him. And neither can I.”
Burry said he had mixed feelings about the meme-stock frenzy of early 2021: “It was fantastic. It was fun. It was kind of tragic.”
But he decided it would be “less fun” by the middle of 2021, when non-fungible tokens (NFTs) are on the rise, along with “watches, shoes, everything.”
Burry said he fears that retail investors will “get torn up on this meme thing,” and warned them to be careful. He spoke out because “if there was one thing I could do, it would be to warn or speak effectively about what was happening in 2005-2007,” he wrote.
The deep-value investor, who moonlighted as an investment blogger in medical school, also teased an upcoming post that will be a “breakdown of GameStop as an investment today.”
“As a melting ice cube and a capital structure with some volatility, GameStop is almost as I approached it in 2018, it’s only 16% short, all the numbers are 10 times bigger and Ryan is running it, for better or worse,” he wrote.
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