Michael Burry, the hedge fund manager best known for predicting the 2008 housing market crash and inspiring the film ‘The Big Short, has issued another stock market warning, this time targeting Tesla’s (NASDAQ: TSLA) stock.
In a November 30 post on his Substack newsletter, Burry called the electric vehicle maker’s stock “ridiculously overvalued,” raising concerns about its current market valuation and the potential long-term effects of shareholder dilution.
Burry, who rose to fame for his successful bet against subprime mortgage-backed securities ahead of the financial crisis, expressed skepticism about Tesla’s financial fundamentals.
He pointed out that the company has been diluting shareholders by an estimated 3.6% annually, and highlighted that this dilution is happening without any stock buybacks to offset the impact. In Burry’s view, this trend serves as a warning sign for investors, especially given the lack of a clear strategy to reverse it.
Musk’s $1 trillion pay package
His concerns were further heightened by Tesla CEO Elon Musk’s ambitious $1 trillion stock compensation package. Burry warned that if Musk meets specific performance milestones tied to the deal, shareholder dilution could worsen significantly, adding more pressure on investors.
At the same time, Burry criticized how Tesla’s stock is priced, arguing that it depends on unrealistic assumptions of perpetual growth and minimal discounting, factors he considers unsustainable in the long term.
According to his analysis, Tesla’s market capitalization, which has surged in recent years, does not reflect the company’s fundamental financial health, and he believes this inflated valuation is driven more by fantasy than solid business metrics.
While Burry’s criticism of Tesla is the latest in a growing list of tech stocks he has questioned, including Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR), his stance on Tesla highlights broader concerns about sky-high valuations in the tech sector and potential bubbles.
He has also been vocal about the booming cloud infrastructure market, which he believes may be overhyped and vulnerable to a downturn.
Featured image via Shutterstock
