Michael Burry attends the premiere of “The Big Short” at the Ziegfeld Theater on November 23, 2015 in New York City.
Dimitrios Kambouris | Getty Images
Michael Burry questioned Teslas' assessment as an investor in “The Big Short” took aim at technology companies' practice of issuing vast amounts of stock-based compensation and excluding it from earnings results.
The investor argues that companies like Tesla should have lower valuations when considering actual profits, which include the cost of this compensation and the negative dilution of the company's value over time.
“Tesla’s market cap is ridiculously overvalued today and has been for some time,” Burry, who became famous for his assessment of a housing bubble in the 2000s, wrote to subscribers to his new paid Substack.
Burry noted that Tesla dilutes shareholders by 3.6% each year and does not offer buybacks. He posted a chart with subscribers that he said shows “the kind of cash value destruction this level of dilution can bring.”
He said the vote to approve CEO Elon Musk's $1 trillion compensation plan meant investors could expect further dilution – meaning those additional shares diluted their ownership of the company. The package received approval from 75% of voting shares, although proxy advisors Glass Lewis and ISS opposed it.
“Given the recent news about Elon Musk’s $1 trillion pay package, dilution is sure to continue,” Burry wrote.
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Tesla in 2025
Tesla's market cap is currently $1.43 trillion. Shares of the electric vehicle maker are up more than 6% so far in 2025, while the S&P 500 has risen by more than 15% over the same period.
Burry noted that it is “not easy” for companies to overcome dilution. He also pointed this out Palantir And Amazon like other well-known technology companies that dilute their shares through employee-based compensation, a practice that, according to Burry, “punishes shareholders.”
The newsletter post goes into detail about how stock-based compensation is not accurately reflected under generally accepted accounting principles (GAAP) and how companies used “adjusted” earnings to represent a bottom line that the practice incorrectly ignores as a real expense.
Burry cites Warren Buffett's view that stock-based compensation is treated as something other than a tangible expense: “What else could it be – a gift from shareholders?” Buffett wrote in his 2018 annual letter to Berkshire Hathaway.
Burry launched his Substack called “Cassandra Unchained” late last month after deregistering hedge fund Scion Asset Management. The blog, which charges an annual subscription fee of $379, has so far focused on why it believes artificial intelligence is a bubble.