[NEW YORK] Michael Burry has bet against the shares of Tesla, saying they are “ridiculously overvalued” and warning that founder Elon Musk’s proposed US$1 trillion pay package would worsen shareholder dilution.
Burry – best known for correctly betting against the US housing market during the 2008 financial crisis – estimated that the electric-vehicle maker’s stock-based compensation dilutes shareholders by about 3.6 per cent per year, with no buybacks to offset it, according to a report from Fortune, which cited a post on the investor’s Substack. He did not respond to Bloomberg News’s request for comment.
The move extends Burry’s bearish stance on highly valued tech stocks and echoes his earlier short of chip bellwether Nvidia, where he raised similar concerns about dilution. With investors already worried about a potential artificial-intelligence bubble, his criticism about compensation structures is helping stoke those worries.
Tesla is already under scrutiny as shareholders debate Musk’s proposed US$1 trillion award, which hinges on performance milestones. The plan’s scale and potential dilution have become focal points for institutions assessing the company’s concentration and key-person risks.
Norges Bank Investment Management, the world’s largest sovereign wealth fund, voted against the package, citing concerns over its size, the dilution, and insufficient mitigation of reliance on Musk. Its stance signals that the pushback now extends beyond outspoken short sellers like Burry to mainstream asset managers.
Tesla’s shares are “priced like an AI or robotaxi Moonshot,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities. “The market’s clearly nervous about how stretched Tesla’s valuation is versus fundamentals. “A lot has to go right, very quickly, to justify” the current valuation, he said.
Burry, made famous by the book The Big Short, revealed the trade soon after deregistering his firm, Scion Asset Management – a move that suggests he wants to use his Substack, Cassandra Unchained, to speak directly to markets and shape the debate around tech valuations.
Tesla’s shares have gained 6.5 per cent this year – significantly trailing the 21 per cent rally in the Nasdaq-100 Index – and are priced at nearly 200 times profits projected over the next 12 months, data compiled by Bloomberg show.
For now, market reaction is muted. The stock closed little changed on Monday (Dec 1), and was up about 1 per cent in alternative trading platform Blue Ocean as of 10.03 am in Singapore on Tuesday. BLOOMBERG
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
