The Big Short investor who predicted the 2008 housing market crash said EV maker Tesla is “ridiculously overvalued” and warned Musk’s $1 trillion pay plan will only make it worse.
Michael Burry, who last month deregistered his hedge fund Scion Asset Management, took to a newly launched Substack account to reveal a bet against Elon Musk’s Tesla.
“Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time,” he wrote in a post.
Burry said Tesla dilutes its shareholders at an estimated rate of 3.6% per year thanks to the stock-based compensation it awards employees without buybacks to offset the impact. CEO Musk’s gargantuan compensation would make matters worse, he added.
The 2025 pay plan, overwhelmingly approved by shareholders last month, could give Musk at least tens of millions of additional Tesla shares that could further dilute existing shareholders’ holdings. At the high end, Musk would receive hundreds of millions of shares that would raise his Tesla stake to 29% from a current 15%, as long as he meets rigorous goals.
Yet, by reaching two of the more achievable goals needed to unlock his pay, Musk could potentially benefit more than the shareholders who have backed him, reported Fortune’s Shawn Tully.
The company’s stock was trading at about $426 Monday, down less than 1% after Burry’s blog post was published, but still up more than 6% year to date on the rebound from a major stock slump earlier in the year.
Apart from being overvalued, Burry also took a shot at the company’s superfans, saying Tesla’s top priority is a moving target.
“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 said.
Tesla did not immediately respond to Fortune’s request for comment.
Burry’s Tesla short follows bets against tech giants Nvidia and Palantir he also recently revealed.
The Big Short investor previously bet against Tesla in 2021, when his hedge fund shorted about $530 million of Tesla stock before exiting the trade months later. At the time, Burry told CNBC it was “just a trade.” It’s unclear how exactly his first bet against Tesla panned out, but based on Tesla’s stock moves from the time Scion disclosed the short to when Burry said he closed it, the firm likely took a loss.
Still, Burry’s stance is not the consensus among Wall Street. Despite his bearish predictions, about three-quarters of analysts have a buy or hold rating on Tesla. After Tesla shareholders approved Musk’s pay package last month, Tesla bull Dan Ives and his team of Wedbush Securities reaffirmed their support of the CEO and his vision for the company.
Musk in the past has not taken kindly to Tesla short sellers. Around 2022, after discovering Bill Gates had shorted Tesla stock, he was “super mean” to the Microsoft cofounder, he later said in an interview.
It’s unclear if Gates has closed the trade, but Musk hasn’t forgotten.
“If Gates hasn’t fully closed out the crazy short position he has held against Tesla for ~8 years, he had better do so soon,” he wrote in a post on X last month.