The investor who famously predicted the 2008 housing market collapse, Michael Burry, has issued a stark new warning, this time targeting electric vehicle giant Tesla. In his investment newsletter, the man immortalized in “The Big Short” dissects the automaker’s valuation, raising specific concerns about shareholder dilution linked to CEO Elon Musk’s unprecedented compensation plan. This critique forces investors to question whether turbulent times are ahead for the stock or if the star investor is mistaken once again.
The Core Concern: Shareholder Dilution and a $1 Trillion Package
Burry’s analysis, published in his “Cassandra Unchained” newsletter, leaves little room for ambiguity; he labels Tesla as “ridiculously overvalued.” His central thesis focuses on what he describes as the gradual erosion of shareholder equity. According to Burry’s calculations, investor ownership is being diluted at an annual rate of approximately 3.6%, a process the company is not countering with share buybacks.
This situation is poised to intensify dramatically due to the recently approved compensation package for Elon Musk. Burry warns that this record-breaking plan, valued at $1 trillion, will significantly accelerate the dilution. Musk could potentially receive up to 12% of all Tesla shares over the next decade if the company hits specific performance milestones.
A glance at key metrics underscores the basis for Burry’s skepticism. Tesla currently trades at 209 times its expected earnings, a stark contrast to the S&P 500’s price-to-earnings multiple of 22. With a market capitalization of $1.4 trillion, Tesla is valued at more than five times that of Toyota, despite the Japanese automaker remaining the world’s largest by sales volume.
Musk’s Political Stance: A Departure on Trade Policy
As Burry challenges the company’s financial foundations, Elon Musk is staking out a political position contrary to current U.S. trade policy. In a recent podcast, he offered surprisingly direct criticism of the tariff strategy associated with the prior Trump administration. “Free trade is generally better,” Musk emphasized, admitting he had unsuccessfully tried to dissuade the former president from implementing new tariffs.
Beyond his comments on trade barriers, Musk defended the H-1B visa program for skilled workers but cautioned against its abuse by companies seeking to hire labor at cut-rate wages. His long-term visions remain characteristically ambitious: Musk predicts that work will become optional within 20 years due to advances in AI and robotics, with energy emerging as the primary currency.
A Broader Warning for High-Flying Tech Stocks
Burry’s critique of Tesla forms part of a wider pattern of skepticism toward the technology sector. He also sees bubble-like conditions in popular AI-focused firms like Nvidia and Palantir and has accused cloud providers of employing aggressive accounting practices. His seriousness was demonstrated back in May 2021 when his Scion Asset Management fund placed a substantial bearish bet against Tesla.
For shareholders, the landscape remains volatile. Tesla’s stock continues to exhibit high price swings. Following a recent decline, shares are trading around 370 euros, representing a notable discount from their 52-week high. Investors now face a critical decision: whether to place their faith in Musk’s long-term vision or heed Burry’s warning of a valuation bubble.