• Michael Burry, the investor famed for predicting the 2008 housing crash, has taken a significant short position against Tesla, calling the stock "ridiculously overvalued."
  • In a post on his Substack newsletter, Burry highlighted Tesla's annual shareholder dilution of about 3.6% and warned that CEO Elon Musk's potential $1 trillion stock compensation package could worsen the problem.
  • Burry argues Tesla's valuation is based on "fantasy," reliant on perpetual growth narratives that have shifted from cars to robots, rather than fundamental business metrics.

Michael Burry is betting big against Tesla Inc., publicly declaring the electric-vehicle maker "ridiculously overvalued" and backing his critique with a substantial short position. In a detailed post on his recently launched Substack newsletter, the investor, who closed his Scion Asset Management firm, laid out a bearish case centered on shareholder dilution and a valuation he sees as detached from reality.

Burry's analysis points to a structural issue for Tesla shareholders: an approximate 3.6% annual dilution of their ownership stake, a process not being countered by any significant stock buyback program. This erosion of equity, he warns, could be dramatically accelerated by the potential activation of CEO Elon Musk's massive stock-based compensation package, which Burry values at around $1 trillion. "Without buybacks, this dilution is a direct transfer of value from existing shareholders," one market analyst familiar with Burry's thesis noted, echoing the concern.

The core of Burry's argument is that Tesla's stock price—trading at roughly 209 times earnings—is sustained by narrative rather than numbers. He contends the market is pricing in perpetual, exponential growth and applying minimal discount rates for risk, a combination he labels "fantasy." This comes as Tesla's core automotive growth has shown signs of stalling, even as the company's future growth narrative pivots toward more speculative technologies like autonomous robots and AI.

Burry has placed his money where his critique is, establishing a short position worth approximately $530 million in Tesla shares, according to people familiar with the matter. This move aligns with his broader skepticism of stretched tech valuations; he has also publicly criticized other high-flyers like Nvidia Corp. and Palantir Technologies Inc. in recent communications.

Attempts to reach Tesla for comment on Burry's specific claims regarding dilution and valuation were not immediately successful. The company's shares were down slightly in pre-market trading following the dissemination of Burry's newsletter post, though broader market sentiment remained mixed. For now, Burry's very public short bet sets up a high-profile clash between a celebrated financial contrarian and one of the market's most iconic and volatile growth stories.

Correction: An earlier version of this article misstated the nature of Burry's current firm. He publishes his analysis via a Substack newsletter after closing Scion Asset Management.