Additional Coverage:
- ‘Big Short’ investor Michael Burry revives his short bet against Tesla, calling the stock ‘ridiculously overvalued’ (fortune.com)
“Big Short” Investor Sounds Alarm on Tesla’s Valuation and Musk’s Pay Package
Michael Burry, the renowned investor who famously predicted the 2008 housing market crash, is once again making headlines, this time with a stark warning about electric vehicle giant Tesla. Burry, who recently launched a Substack account after deregistering his hedge fund Scion Asset Management, has revealed a significant bet against Elon Musk’s company, calling its market capitalization “ridiculously overvalued.”
In a recent post, Burry outlined his concerns, primarily focusing on what he views as excessive shareholder dilution. He claims Tesla’s practice of awarding employees stock-based compensation without corresponding buybacks leads to an estimated 3.6% annual dilution for shareholders.
Burry argues that CEO Elon Musk’s recently approved 2025 pay plan, which could grant him tens of millions, or even hundreds of millions, of additional Tesla shares, will exacerbate this problem. This plan, overwhelmingly approved by shareholders last month, could potentially raise Musk’s stake in the company from 15% to 29%, provided he meets rigorous performance goals.
However, a report from Fortune‘s Shawn Tully suggests that by achieving even some of the more attainable goals, Musk could benefit disproportionately compared to the shareholders who backed him.
Despite Burry’s public short position, Tesla’s stock saw only a minor dip of less than 1% on Monday, trading at approximately $426. The company’s stock is still up more than 6% year-to-date, recovering from an earlier slump.
Beyond the valuation, Burry also aimed criticism at Tesla’s dedicated fanbase, suggesting their focus shifts as competition emerges. “As an aside, the Elon cult was all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now is all-in on robots-until competition shows up,” the legendary investor wrote. Tesla has not yet responded to requests for comment.
This isn’t Burry’s first foray into shorting Tesla. In 2021, his hedge fund bet against approximately $530 million of Tesla stock, though he exited that trade months later, calling it “just a trade.”
While the exact outcome of that initial bet is unclear, it’s believed the firm likely incurred a loss. Burry’s current short against Tesla follows similar bets against other tech giants, Nvidia and Palantir.
Despite Burry’s bearish outlook, his perspective doesn’t represent the consensus on Wall Street. Roughly three-quarters of analysts currently hold a “buy” or “hold” rating on Tesla. After shareholders approved Musk’s pay package, analysts like Dan Ives of Wedbush Securities reaffirmed their support for the CEO and his vision for the company.
Musk himself has a history of responding strongly to Tesla short-sellers. In 2022, he reportedly became “super mean” to Microsoft co-founder Bill Gates after discovering Gates had shorted Tesla stock. While it’s unknown if Gates has closed his position, Musk clearly hasn’t forgotten, recently urging Gates on X to “fully close out the crazy short position he has held against Tesla for ~8 years.”