Michael Burry says Tesla stock is 'ridiculously overvalued'

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Michael Burry has decided Tesla belongs in his personal pantheon of overvalued giants. The “Big Short” investor, who named his new Substack “Cassandra Unchained” after the doomed mythological prophet and amassed about $1.1 billion in puts on Nvidia and Palantir, is now using his newsletter to argue that “Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time” and that CEO Elon Musk’s $1 trillion pay package all but guarantees more dilution for shareholders.

In Burry’s latest Substack post, “Foundations: The Tragic Algebra of Stock-Based Compensation,” the investor walks through how generous equity awards quietly eat into “owner’s earnings” over time. Burry parks Tesla squarely in the middle of what he calls the “tragic algebra of stock-based compensation.”

The Musk plan, approved by Tesla shareholders in early November, could be worth up to $1 trillion if the company hits aggressive production and market-cap milestones, including a long-term valuation target of about $8.5 trillion tied to robotaxis and humanoid robots. 

That, in Burry’s view, is less a reward than a standing instruction to keep issuing equity at a company that’s already priced like a market colossus, with a trailing P/E ratio of nearly 300. For existing shareholders, he argues, the math is simple: You’re paying a giant’s multiple for a shrinking slice of the pie.

Writing about what he labels the “Elon cult,” Burry says the company’s ever-faithful fans were “all-in on electric cars until competition showed up, then all-in on autonomous driving until competition showed up, and now [are] all-in on robots – until competition shows up.” Every time one of Tesla’s business lines starts to look mortal, he says, the narrative jumps to the next frontier — and the valuation comes along for the ride.

Tesla is a familiar foil for Burry. Back in 2021, his recently deregistered Scion Asset Management disclosed bearish put options on 800,100 Tesla shares — a notional $534 million bet at the time — while Burry was posting on social media that Tesla investors should “enjoy it while it lasts.” He eventually told CNBC he’d closed the position and downplayed it as “just a trade,” saying the media had overhyped the size and significance of his short.

The new Substack salvo doesn’t put fresh Tesla options on the record, but it does fold Musk’s company into Burry’s broader argument that the market is once again paying bubble prices for companies it assumes will grow in a straight line. Burry has, in recent weeks, used his Substack (and his filings) to argue that stock-based pay and circular deal-making are eroding shareholder value across the AI trade, drawing explicit parallels between today’s market leaders and past bubbles.

Tesla, meanwhile, is still trading like the future belongs to it. The company’s shares are up about 14% year to date, helped by enthusiasm for its robotaxi rollout and its Optimus humanoid robot, and it continues to hold roughly 41% of the U.S. EV market, even as that share has slipped. Supporters say the $1 trillion package simply locks in Musk’s attention while he tries to turn Tesla into an AI and robotics powerhouse. Critics such as Burry see the same facts and a different myth: a stock already priced for legend, now committed to handing out more of itself on the way.

Burry is betting that when this particular mythology is written down, the giant looks smaller than the legend on the way up. Yes, he picked Cassandra, a prophet nobody believed, as his mascot, so he seems to expect to be ignored until disaster shows up. But with his Substack, he’s not just shouting from the walls of Troy. If Burry is right, Tesla’s robotaxis and humanoid helpers could turn into something closer to props in a familiar story about how long investors are willing to believe in giants.