GameStop stock soared on Monday after news about a certain person. That person is Michael Burley. He is an investor known for betting on the U.S. housing market before the financial crisis. He revealed that he is buying GameStop stock again.
The stock rose more than 6% after his comments were made public. Michael said he recently acquired GameStop and believes the price is close to 1x tangible book value and 1x net asset value. He shared this in a Substack post published on Monday.
He also pointed out that Ryan Cohen is running the company and leveraging capital and cash flow for the long term. The message was simple. This was not a short-term trade, nor was it a bet on a meme.
Burley develops long-term value bet
Michael recently closed Scion Asset Management. He said the position is a long-term value play. He said this is not based on a new meme stock action. GameStop rose to prominence during the retail trading frenzy about five years ago.
Online traders pushed up prices, forcing hedge funds to cover their short positions. That period is over. After that, the trading calmed down and the speculation died down.
Michael writes, “I don’t count on a short squeeze to realize long-term value.” He added: “I believe in Ryan. I like what I think is the setup, the governance and the strategy.” He also expressed his intention to hold the stock for the long term and be patient. He said he is 15 years older than Ryan but is still willing to wait.
After the meme surge ended, GameStop gave back most of its profits. The stock has since traded around $25 per share. Still, the company has capitalized on strong investor interest in the past to raise billions of dollars through initial public offerings. These sales left GameStop with a large cash balance.
Michael spoke directly about it. He wrote, “Ryan is making lemonade out of lemons.” He added: “His management is crap, but he’s capitalizing on the meme stock phenomenon to raise cash and squeeze as much as he can while he waits for an opportunity to make a big acquisition of a truly growing dollar business.”
The video game retailer also started purchasing Bitcoin last year. This decision followed a similar approach taken by MicroStrategy, now known as Strategy. Ryan said the move was driven by macro concerns.
He said Bitcoin’s fixed supply and decentralized design protect against certain risks. Michael responded cautiously, writing, “I don’t know about the Bitcoin thing, but I can’t refute what has been done.”
Michael isn’t the only one backing the company. Just last week, Ryan bought 1 million shares of GameStop. The acquisition was disclosed in an SEC filing on January 21st. In his filing, Ryan said it was “essential” for CEOs of public companies to purchase stock with personal funds to strengthen alignment with shareholders.
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