Michael Burry takes another swing at Tesla’s valuation
Michael Burry, the short seller who correctly bet against the housing market in 2008, is back with familiar fire aimed at a familiar target. In a new Substack post, he calls Tesla “ridiculously overvalued”, taking a fresh jab at the electric car maker’s stock and its habit of paying employees with shares rather than cash.
Burry’s main complaint is what he calls the “tragic algebra” of stock based compensation. Tesla dilutes its shareholders by about 3.6 per cent a year, he says, and does so without buybacks to offset the effect. He adds that Elon Musk’s recently reapproved compensation package, which he describes as a $1 trillion pay deal, will eventually dilute the stock even further.
His critique also extends to Tesla’s shifting ambitions. In a parenthetical aside, he writes that 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.” It is a pointed summary of Tesla’s increasingly sprawling pitch to investors and the market’s willingness to keep believing in whichever product Musk spotlights next.
Notably, Burry did not disclose a current position in Tesla. He has, however, been busy elsewhere. Last month, he took sizeable short positions in Nvidia and Palantir via put options and then deregistered his hedge fund, Scion Asset Management, before moving his commentary to Substack. His concerns over Nvidia echo those of another celebrated short seller, Jim Chanos, who recently questioned the chipmaker’s use of vendor financing.
Both Chanos and Burry have shorted Tesla in the past, and Elon Musk has not been shy about returning the sentiment. Musk has repeatedly baited short sellers online, at one point telling Bill Gates to close out his Tesla short “soon”.
Despite Burry’s warnings, Wall Street is drifting in the opposite direction. Analysts have grown more upbeat, citing Tesla’s progress in autonomy, chip development and its hoped for robotaxi service. Melius Research recently called Tesla a “must own”, while Stifel raised its price target and reiterated a Buy rating.
Whether Burry is early, wrong or simply tired of watching Tesla defy gravity is unclear. What is clear is that the long running feud between Tesla’s critics and its believers is very much alive, and Musk will not run out of enemies or defenders anytime soon.
