Michael Burry's Return to GameStop: Betting on Value, Not Hype

The legendary contrarian investor who famously profited from the housing market collapse has made a striking move: Michael Burry is back in GameStop. In a recent Substack announcement, Burry revealed he’s been accumulating shares of the video game retailer, positioning this as a long-term value investment rather than a speculative play. The market took notice, with GameStop shares climbing roughly 6-8% on the heels of his disclosure.

This marks Burry’s second innings with GME. He originally purchased shares in 2019 but exited his position in late 2020, missing the explosive January 2021 retail-driven rally that captivated the financial world. What’s different this time: Michael Burry is explicit about his investment thesis. This isn’t about short squeezes or social media momentum. It’s about fundamental value and disciplined capital deployment.

The Investment Case: Beyond Meme Stock Mania

Michael Burry’s conviction rests on a simple but powerful premise: GameStop is sitting on an enormous war chest of capital. The company maintains $4.7 billion in net cash—accumulated during periods of peak retail trading frenzy. Rather than frittering away this liquidity, Burry believes the current leadership will deploy it strategically.

Burry targets a purchase price around tangible book value, emphasizing his focus on downside protection rather than momentum. In his own words: management is “making lemonade out of lemons.” The core business of selling video games may be challenged, but the question isn’t whether GameStop can save retail gaming—it’s whether leadership can intelligently redeploy massive cash reserves into higher-return opportunities.

Ryan Cohen’s Strategic Vision

The crux of Michael Burry’s thesis hinges on one person: CEO Ryan Cohen. Cohen arrived at GameStop’s helm in 2023 (after becoming chairman in 2021) with an ambitious mandate: transform a legacy retailer into a capital allocation vehicle. Cohen has repeatedly drawn parallels to Warren Buffett’s playbook at Berkshire Hathaway, where the legendary investor converted a dying textile mill into a diversified conglomerate generating returns across multiple industries.

GameStop’s financial performance suggests this strategy is gaining traction. The company has aggressively rationalized its store footprint, closing locations while maintaining profitability. As of early 2025, GameStop operated 3,203 stores—down from 4,816 in January 2021. Despite this contraction, net income soared 343% to $77.1 million in the latest quarter, and the company has now posted six consecutive quarters of GAAP profitability.

Cohen emphasized that capital allocation decisions are driven by “maximizing return” and “not losing money”—a disciplined approach reflected in GameStop’s exploratory moves, including selective ventures into collectibles and more recent cryptocurrency holdings.

Incentive Alignment Through Performance-Based Compensation

A critical element supporting Michael Burry’s investment thesis is the performance-based compensation structure tied to Cohen’s future at GameStop. Shareholders face an upcoming vote on a stock option package that would grant Cohen the right to purchase up to 171.5 million shares at $20.66 per share—contingent on hitting aggressive milestones.

The targets are ambitious: achieving a $100 billion market valuation and $10 billion in cumulative EBITDA performance. Crucially, Cohen receives no guaranteed salary, cash bonuses, or time-vested equity. His entire compensation package is entirely at-risk and performance-dependent.

Cohen himself has signaled skin-in-the-game commitment. Last week, he purchased 1 million shares with personal funds for approximately $21.4 million—a vote of confidence that his incentives genuinely align with shareholders. In an SEC filing, Cohen stated it’s “essential” for a public company CEO to invest personal capital, “to further strengthen alignment with stockholders.”

What Michael Burry’s Move Signals

Michael Burry’s return to GameStop sends a clear signal: sophisticated investors are seeing beyond the meme stock narrative. While acknowledging uncertainty around some strategic moves—such as the company’s recent entry into bitcoin holdings—Burry’s position reflects confidence in management’s capital allocation discipline and long-term value creation potential.

For investors monitoring insider conviction levels, Michael Burry’s accumulation at reasonable valuations deserves serious consideration. His track record of identifying mispriced situations, combined with fundamental improvements in GameStop’s financial discipline and profitability, suggests this thesis warrants attention from value-oriented portfolios.