Imagine being right about a trade, pushing management to make exactly the moves you wanted, and then selling weeks before it turns into one of the most spectacular rallies in stock market history. That's the story Michael Burry just told about GameStop Corp. (GME).

The legendary investor famous for calling the 2008 housing collapse wrote a candid Substack post on Tuesday admitting he sold his massive GameStop position in late 2020, missing the January 2021 frenzy that broke Wall Street and minted fortunes for retail traders. His firm, Scion Asset Management, exited entirely in the fourth quarter of 2020, leaving what Burry estimates could have been a $1 billion windfall on the table.

Why He Walked Away

Burry started building his GameStop position back in 2019, eventually accumulating roughly 3 million shares at an average cost of about $3.32 per share (pre-split). He wasn't just along for the ride either—he actively pushed the company's board toward aggressive share buybacks that reduced the float, setting up what would become the perfect conditions for a short squeeze.

But as the stock climbed into the mid-teens in late 2020, Burry decided to exit. The reason? He wasn't sold on Ryan Cohen, the activist investor who had just taken a stake in the company. Sure, Burry had met with Cohen privately in 2019 and thought he was a "deep value investor." But when Cohen published his November 2020 manifesto calling for a "tech-forward" transformation, Burry saw red flags.

He called it "execution risk"—Wall Street speak for "this sounds good on paper but could easily blow up." Burry preferred the straightforward math of buybacks over vague promises about digital transformation. Add in client withdrawals at Scion, and he pulled the trigger on selling everything.

Dissecting The Gamma Squeeze

In his post titled "GameStop, The Prequel," Burry didn't just confess to mistiming the trade. He offered a technical breakdown of what he calls the only "legal market corner" he's ever witnessed.

The mechanism was something called a gamma squeeze. Retail traders piled into call options—basically betting the stock would go up—in such massive volumes that market makers like Citadel and Virtu were forced to buy the underlying stock to maintain what's called delta neutrality. It's a hedging requirement that turned into a feedback loop: more calls meant more stock buying, which pushed prices higher, which meant even more stock buying.

Burry pushed back against the popular narrative that "naked short selling" was the main culprit. Instead, he argued that the extreme volatility broke the standard "layering" of synthetic positions, triggering a panic unwind among perfectly legal short sellers who suddenly found themselves trapped.

The Pattern Behind The Trade

Burry connected his GameStop play to an earlier investment he made in 2001—a scandal-ridden software company called Avanti that he bought for pennies on the dollar. He calls it his "Village S**t" strategy: finding deeply unloved companies trading at absurd discounts to their fundamental value.

That approach worked brilliantly with GameStop on paper. His fundamental thesis was sound, and the buybacks he advocated for actually happened. But he admits he was "blinded" by traditional valuation metrics. He couldn't see that retail traders would transform what he viewed as a "melting ice cube" business into a global phenomenon driven by social media momentum and anti-establishment sentiment.

Where GameStop Stands Now

The meme stock magic has largely faded. GME shares have dropped 27.95% year-to-date and are down 24.97% over the past year. The stock did show some life recently, gaining 7.76% over the last month, though it's still down 5.27% over the past six months.

Shares closed 4.05% higher at $22.09 on Monday and were down 0.32% in premarket trading on Tuesday. Market data indicates GameStop maintains weaker price trends across short, medium, and long-term timeframes, though it retains a solid growth ranking.

For Burry, the GameStop saga stands as a reminder that being fundamentally right isn't always enough. Sometimes the market does things that defy traditional analysis—and if you're not prepared for that possibility, you might miss the biggest trade of the decade.