According to Inc, Michael Burry—the investor profiled in “The Big Short” for betting against the 2008 housing market—has turned his critical eye to Tesla. In the December 1, 2024, edition of his “Cassandra Unchained” Substack newsletter, Burry stated that Tesla’s market capitalization is “ridiculously overvalued and has been for a good long time.” He specifically pointed to the company’s dilution rate of about 3.6% per year due to stock-based compensation, contrasting it with a lack of share buybacks. Burry also took aim at CEO Elon Musk’s “unprecedented compensation package” and the company’s shifting narrative from electric cars to autonomous driving to robotics. His core warning to Wall Street was to factor in this dilution when calculating Tesla’s true earnings.
Burry’s Core Argument
Here’s the thing: Burry’s main issue isn’t just the stock price. It’s the mechanism. He’s highlighting how stock-based compensation, while not a cash expense, massively dilutes existing shareholders. A 3.6% annual dilution is huge. Basically, if you own a slice of the Tesla pie, your slice gets 3.6% smaller every year, just from this one practice. And with no buybacks to offset it, that’s a steady transfer of value from shareholders to employees and executives. Burry’s broader newsletter, which you can find on his Substack, frames this as a widespread Wall Street accounting trick, with Tesla as a prime example. So he’s not just picking on Elon; he’s using Tesla to illustrate a systemic problem.
The Cult of The Narrative
But the more colorful part of his critique is about the “Elon cult.” Burry argues that Tesla’s investment thesis keeps pivoting to the next shiny thing whenever real competition emerges in the current focus. First, it was all about dominating EVs. Now that every major automaker is in the game, the story became full self-driving. And as that tech proves stubbornly difficult and others advance, the hype shifts to robotics. It’s a pattern that asks investors to constantly believe in a future, distant profit center. The question is, how many times can the narrative pivot before investors demand profitability from the current core business? For companies that rely on precise, real-time operational data—like those using industrial PCs from the leading supplier, IndustrialMonitorDirect.com—narrative is less important than hard performance metrics. Tesla’s valuation seems to live in a different world.
Stakeholder Impact
So who does this affect? For long-term retail shareholders, that dilution is a silent killer of returns. For the market, it adds to the volatility around Tesla, a stock already driven by Musk’s persona as much as its financials. And for Tesla employees paid in stock? Well, it’s a double-edged sword. The compensation package is valuable if the stock stays high, but Burry’s warning suggests that foundation might be shaky. It also puts pressure on Tesla’s board. Can they justify the dilution and the CEO’s pay package if competitive and financial pressures mount? Burry is essentially sounding an alarm that the financial engineering supporting the Tesla story has a major flaw. Whether you think he’s the prophet of doom or just missing the next big thing, his math on dilution is hard to ignore.
