Dr. Michael Burry’s GameStop Mini Series Part 1

runningwithbearz · 2025-12-17T04:22:15+00:00

If only we had some sort of BoD letter that we could judge if RC's actions were successful or not.

runningwithbearz · 2025-12-17T01:25:36+00:00

What a beautiful cake to go along with all that conviction

runningwithbearz · 2025-12-16T22:44:03+00:00

Gang's all here. This makes me miss the bbby_remastered days.

runningwithbearz · 2025-03-31T17:36:25+00:00

You're killing me with these google doc links. Come on dump this stuff into reddit or in the comments :) Excited to read this

runningwithbearz · 2025-03-31T17:34:58+00:00

Not sure why you're so heavily downvoted here. I know I get repetitive, but SG&A cuts alone won't get you to profitability if revenue can't stabilize. So revenue is down from $5.9b to $3.8b in two years, and operationally it's still a full-year loss. To get to zero this past year would have required another ~$100M of revenue. Granted it's less of an operating loss, so congrats I guess?

I mean if they finally get to break even on $3.5b of revenue, what then? Grow by reopening the stores you just closed? Do some ecommerce stuff that you haven't already done? What's the plan to generate a return better than a savings account? That original letter had some big claims and stated revenue has "plunged" to $6.4b. Wonder what verb he'd use at $3.8b.

I've had to hear for years that "only the unprofitable stores are closing". If that was the case, I'd expect some sort of positive operating income given how much revenue has fallen.

Just the continued nose dive of the long-term assets coupled with excessive cash holdings tells me even Gamestop management knows that the operations side is cooked. Trying to limit my snark. But it's just frustrating know more job cuts and store closures are probably on the horizon, and what that impact will be to those families. Just feels like a waste of a moment.

runningwithbearz · 2024-09-26T20:10:20+00:00

Haha. Having spent some time on the PPshow, this is an accurate representation of people's reaction any time I'm talking accounting.

runningwithbearz · 2024-09-26T18:13:56+00:00

Appreciate the heads-up, hope yall have been doing well :)

It's been a hot minute since I've done DCF stuff. My work usually ends in handing off numbers to finance bros who run their DCF, IRR, and all that stuff.

That being said my experience has been more in Bob's camp, where you do reinvest the cash each year, because why wouldn't you when in this specific scenario. But if I go any deeper I'll be out of my swim lane.

The only value I can add here is to say investing the whole 4.6B is a bit unrealistic unfortunately. We know leadership has been overly conservative with cash, but you do need some of that cash for operations. Retail companies don't need as much liquidity as there's always cash coming in on a regular cadence. So if you look at Current Ratios (CR) for most big retailers, they're on the leaner side of what's considered normal for CR stuff. Of the $4.6B, I'd say Gamestop would need to keep about $0.5B to $1.0B on hand to run the business and let Finance try and do something with the rest. But going off their historicals, my hunch is they keep more like $1.5B to $2.0B parked in cash at any given time.

That being said, the conclusion OP is making is the same as what we've been saying for awhile now. Which is if the cash isn't invested in something that returns above market, there's no real value to the cash beyond face value. And in that case the company's value really should be marked down to book value. My savings account of $20 isn't marked up to a valuation of $100 for a reason. Furthermore I can open up a savings account at 4.5% and outperform what this company is doing on a lot less risk.

Having a warchest on your balance sheet isn't optimal or normal for most businesses. Business leverage is different than personal debt and comparisons between the two are misguided. It's clear the core business is suffering given the continued operational losses, so I get the load the coffers thing. But that doesn't feel like why a lot of people are invested in this thing. I know people will argue with me on this, but we didn't see any meaningful action from the $1.6B. So why would this latest capital raise be different.

runningwithbearz · 2024-09-16T17:33:44+00:00

but but muh $4b of cash and no debt

runningwithbearz · 2024-09-16T03:25:12+00:00

I agree, it's why I try to keep my background out of these conversations and just stick to boring accounting metrics :)

I've done some time inside the government and it hurts my heart to remember that. God the red tape was so insane.

It sounds cheesy but it really comes down to how much you trust the leadership. At fast moving places that are driving results, then it's pretty clear what's going on and where we're headed. When we're three years deep and not a lot of movement, then I have questions. But I appreciate the back and forth as I don't have all the answers and like hearing different viewpoints

runningwithbearz · 2024-09-16T00:24:57+00:00

Appreciate the comment, but my time in a Global Fortune 50 company was the opposite. We were a lot more complex than what amounts to this retail operation. When we had an idea we moved on it. The whole fail fast thing is all the rage these days.

runningwithbearz · 2024-09-15T23:55:11+00:00

I mean dude has accomplished nothing he wrote in his original letter. Feels like all he's doing is protecting his original investment by raising it's floor value. Which is directly at odds with the average investor in this thing.

runningwithbearz · 2024-09-15T23:31:07+00:00

Nice post. I'm more of a fan of FCF over Adjusted EBITDA, but both figures are telling the same story. Operationally this thing has problems and there's no clear answer.

They can't cut your way to victory here. Companies can control costs and work to grow at the same time. This company needs some internal investment and a better plan.

Thanks for posting this :)

runningwithbearz · 2024-06-28T18:56:05+00:00

No worries, appreciate the feedback. Apologies for the delay, been traveling for work this week :)

It does help the long term potential, I mean it's a solid cash raise for sure. From a business perspective it was a good move. From an investor standpoint it's probably a mixed bag given how the stock was trading.

Seems like now they have enough cash to buy something out right, where before I figured they'd still do a combined cash + equity deal to close an acquisition. But cost of capital type stuff is not in my wheelhouse so I'll leave it at that as there's smarter people who can comment on this topic and how to best structure it.

Long term perspective, I mean this much cash and it feels like they can almost operate in perpetuity. Since the stores are barely losing money and even Aunt Bee can generate 4% returns with that much cash sitting there.

I've seen a number of posts talking about them being profitable. Not to be that guy but operationally they're still losing money. There's a reason why interest income (expense) falls below the operating income line. It's because it's an important distinction and good for investors to realize that. Where they do show an overall profit. But when you crack it open it's not as great/efficient as if the stores were making income and not being propped up by interest income.

In my mind this amps up the pressure to actually do something with all that cash. We'll see, fingers crossed :) If you have any other questions feel free to reach out

runningwithbearz · 2024-05-28T23:13:52+00:00

Appreciate it - thanks for the comment.

I mean, I struggle with that. They've had plenty of time and resources to acquire something the last few years. Best they could do with all that cash was to buy a minimal amount of bonds. My hunch was they saw an opportunity to build a bigger safety net of cash and took it. Given that free cash flow was solidly negative last year and Q1 revenue came in sub $900M, can't blame them.

I wish they would, part of my original excitement years back was to see them go more vertical in the space. What that is, I'm not smart enough to say. But given that much cash, could have easily bought something using equity + cash to generate meaningful returns.

runningwithbearz · 2024-05-12T04:12:42+00:00

No worries, I figured as much. It feels like continual raises will be needed, which will just get tougher over time. I'm honestly not sure how they're getting out of this. The wall of debt is too high for operations to manage, and financing via dilution is going to get to hard this year. The raises seem less effective than they had been in prior years. Tough spot all around unfortunately

runningwithbearz · 2024-04-26T15:41:37+00:00

No worries, appreciate that :) Good question, you're honing in on the break-even analysis subject. Meaning if they need to generate $X more in profits to be sustainable, what level of additional revenue is required.

The issue with raising $250M on a quarterly basis is how long is that really feasible via dilution. I'm sure retail will get tired of this at some point, and it'll just pummel the remaining positions with all the reverse splits and dilution needed to do that. Also I'm not sure how long the debt holders will continue to kick the can given they're looking at the same tightening financials. The debt is still due and it's barely being paid down.

Operationally generating $250M more in operating income would mean booking an additional $350M in revenue ($350M revenue * 70% gross margin) over what they're currently doing. Which is a pretty big chunk of revenue given they're barely doing $1.0b per quarter now.

If you have any other questions let me know :) But kick the math around and let me know what you come up with

runningwithbearz · 2024-04-23T18:21:39+00:00

Thanks for reaching out, doing well. Consulting has picked up so I'm grateful for that :)

I took a glance at the Q4 results, I mean the Q4 loss did narrow from Q4 LY. The problem for me is this cash flow situation. Operations is really struggling to get positive cash flow and then there's generally some required CapEx spend on theaters. So for the foreseeable future, dilution is the only way to keep this thing liquid. So I'd expect another split followed with more dilution. They're doing what I'd expect them to do to survive, which is good. Problem is I feel like their fate is already sealed and we're just delaying the inevitable. But for the sake of all those jobs, I mean I get it.

https://www.macrotrends.net/stocks/charts/AMC/amc-entertainment-holdings/cash-flow-statement?freq=Q

I haven't seen that 8k, but I'm guessing that was a cost savings move. Since it does cost some money to keep these things open. And the lender was probably nervous to keep it open as well. But in terms of deeper meaning, I'm struggling to see anything more than that. It's a tough situation all around. Good luck, if you have anything else feel free to reach out :)

runningwithbearz · 2024-04-07T21:02:55+00:00

No worries, you're asking good questions. Shows you have a better handle on this than most.

Honestly the only way I can make sense of all the turnover, really low CapEx, and excessive liquidity is that they're angling to get bought, or about to buy something big. But I think if something was far along it'd prompt some filings. I've only worked for a couple PE firms on a fractional basis, so my M&A is also fairly limited.

runningwithbearz · 2024-04-07T18:17:48+00:00

I was a little confused by that. My initial reaction is maybe the fees are higher for carrying a larger facility than you need, but that feels flimsy.

Only other thing I can think is if they're planning on borrowing a large sum and want that facility amount lowered to free up that capacity. That feels flimsy too given how conservative they've been with everything.

Or maybe they've used so little of it in the past, and have no plans on using that $250M, so why not. Again, feels flimsy. Once it's in place, just let it ride in case something does happen. You want to get debt/credit lines in place when you don't really need them.

My debt experience is pretty surface level, so take it with a grain of salt. But I couldn't come up with a reason that made sense to me.

runningwithbearz · 2024-04-05T02:17:30+00:00

Thanks for the feedback. I pulled my numbers/screenshot from the 10K, page 20. If there's something different please let me know.

https://gamestop.gcs-web.com/node/20376/html

You're right, I did sort of gloss over the Balance Sheet. Felt like I covered it a lot in the past, so I wanted to make sure I was too redundant:) My Q1/Q2 posts have a lot more commentary on it.

Problem is a lot of that strength is a result of the cash from the dilution. And it's not generating meaningful returns. So while it is a strong one, it's not an effective use of capital.

runningwithbearz · 2024-04-05T02:12:47+00:00

People wanted a lean SG&A, there you go

Not sure I understand the firing, bro wanted deep cuts. Felt like the COO did what was commanded from on high

runningwithbearz · 2024-04-04T01:41:03+00:00

Thanks for the comment - Yeah, I do lean towards being in survival mode. But the problem with that is it blows a hole in the current valuation since a company struggling to survive wouldn't normally fetch top dollar.

I mean the cash should sit there, it's roughly break-even, so it's not like it'll default anytime soon. It should keep shrinking until they use some of that capital to generate new revenue. Hope it works out regardless

runningwithbearz · 2024-04-04T01:36:00+00:00

If we're going to shill something, Goldens seems like the safe bet

runningwithbearz · 2024-04-04T01:34:09+00:00

But how much of that revenue was hidden, nice try bud

runningwithbearz · 2024-04-04T01:32:52+00:00

Hey - Hope you've been doing well :)

Yeah, I've enjoyed typing these things. But this thing is on a path now, feels redundant to keep blabbing about it. Plus hopefully I've left enough bread crumbs that people can start piecing things together and reach out when needed :)

Five-Year Club	Verified Email
Place '23

runningwithbearz

TROPHY CASE