Ryan Cohen has brilliantly converted the meme stock retail crowd into loyal shareholders handing him a $10Bn cash rich investment vehicle.
I bought GameStop shares this morning, convinced largely by Dr.Michael Burry’s 8,000 word due diligence masterclass on this stock. Most of his articles on stocks are; I bought Molina Healthcare, (MOH) last month, another one of his recommendations coming away strongly convinced that it was a hidden gem.
GameStop has now become a holding company, or 70-80% on its way to becoming one with $8.8Bn in cash and a market cap of 10.75Bn, just 20% more than the cash in its bank.It does have long-term debt, but non-interest bearing convertible notes, which gets converted to equity if GameStop’s stock crosses certain thresholds. In my estimate, the notes will get converted, not because of a short squeeze, but retail shareholders are likely to stay invested expecting Ryan Cohen to allocate that cash wisely to the benefit of the shareholders.
What about Ryan Cohen? Ryan Cohen, who cofounded Chewy and sold it to PetSmart, started investing in GameStop 5-6 years ago during its meme stock craze and and arbitraged the short squeeze smartly enough to get rid of its loss making stores and liabilities to create a cash rich holding company, that it is today. At this point, the value of GameStop is in the ability of Ryan Cohen to allocate and grow its billions. Investors know that GameStop has been shrinking its store count dramatically, and closing the retail business, which was dying anyway. The story of how Cohen pulled it off is brilliantly captured in Dr. Burry's article, but not the subject of this post.
Massive Capital Optionality: With $8.8 billion in cash and virtually no debt, Ryan Cohen has one of the cleanest "blank check" balance sheets in the market. This allows him to be the "lender of last resort" or a "sweetheart" deal-maker during market downturns, much like Buffett in 2008.
The NOL Tax Shield: The $750M+ in unrestricted Net Operating Losses is a hidden asset. By acquiring a profitable business, GME can shield that new company’s earnings from federal taxes, effectively increasing the acquisition's post-tax yield compared to any other bidder.
Extreme Management Alignment: The January 2026 CEO Performance Award is 100% "at-risk." Ryan Cohen receives zero salary or cash bonuses; he only profits if he hits massive milestones ($100B market cap and $10B cumulative EBITDA). This ensures he is incentivized to pursue high-growth, high-margin acquisitions rather than just managing a slow retail decline.
NAV-Accretive Dilution: GameStop's earlier equity offering and current convertible notes allow debt conversion at stock prices at 5–8x tangible book value during price spikes. This way, GME has successfully "arbitraged" its own stock to raise capital at extremely good rates. This math has allowed the tangible book value per share to rise even as the total number of shares increased, protecting the "floor" for long-term holders.
Positive Carry on Debt: The recent convertible debt offerings (due 2030 and 2032) carry a 0% interest rate. GME can take that capital and earn 4–5% in money market funds or short-term Treasuries, meaning the debt itself is currently generating risk-free earnings that contribute to the company's bottom line.
Quoting Dr. Burry’s from Cassandra unchained:
Simply, Ryan’s plan appears to be to raise more cash with another stock rally into the $30s. This is the idea behind the warrants and the two big debt offerings. He has to be careful not to issue so many shares though that there is a 50% ownership change within a rolling 3-year period, which would significantly limit use of those NOLs. Not an asset to lose.That NOL shelter also makes any business GameStop buys cheaper for it than almost any other buyer. The tax-free post-deal cash flow will be larger and can support a higher price for a bid.
The "Section 382" Ownership Trap: The biggest technical risk is an "ownership change" (a 50% shift in shareholders over 3 years). If GME issues too many shares too quickly to fund a massive buy, they could forfeit the NOL tax shield, destroying one of their primary competitive advantages in the M&A market.
The Shrinking Core Anchor: While the "liquidation" of the retail business provides cash, the hardware and software revenue continues to decline (down ~12% and ~27% respectively in recent quarters). Cohen must find a "cash cow" acquisition fast enough to replace the vanishing retail cash flow before the market loses patience with the "holding company" narrative.
Valuation "Ennui" and Multiple Compression: If Cohen remains patient for too long without announcing a major acquisition, the premium may evaporate, causing the stock to drift toward its cash value ($13–$15 range), which could trigger the very "forced conversion" or "put" scenarios in the debt offerings you want to avoid.
Dr Burry concludes with:
So, Ryan is making lemonade out of lemons. He has a crappy business, and he is milking it best he can while taking advantage of the meme stock phenomenon to raise cash and wait for an opportunity to make a big buy of a real growing cash cow business. If I am Ryan now, I want the stock to rally into the $30s. I want to raise cash through those warrants and I want to get rid of the debt by issuing equity. Then, I would proceed to live my life doing my best Warren Buffett impression. Patiently buying all or in part great businesses and doing sweetheart financing deals in tough times. I own GME. I have been buying recently. I expect I am buying at a bit over what may soon be 1x tangible book value / 1x net asset value. And getting a young Ryan Cohen investing and deploying the company’s capital and cash flows. Perhaps for the next 50 years . That is not a common occurrence in the U.S. stock market today. With the downside protected by its tangible asset value, being long GameStop is almost as asymmetric as it gets these days in U.S. common stocks. I believe in Ryan, I like the setup, the governance, the strategy as I see it. I am willing to hold long-term, and I am excited to see where this goes.
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