Michael Burry attends the premiere of “The Big Short” at Ziegfeld Theatre on November 23, 2015 in New York City.
Dimitrios Kambouris | Getty Images
Michael Burry questioned Tesla‘s valuation as the investor of “The Big Short” fame took aim at the practice of technology companies issuing tons of stock-based compensation and excluding it from earnings results.
The investor argues that when accounting for the true profits that include the cost of this compensation and its negative dilution of the company’s value over time, companies like Tesla should have lower valuations.
“Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time,” Burry, who rose to fame for his call on a housing market bubble in the 2000s, wrote to subscribers of his new paid Substack.
Burry pointed out that Tesla dilutes shareholders at a rate of 3.6% each year and doesn’t offer buybacks. He posted a chart with subscribers that he said “shows the kind of present value destruction that this level of dilution can impart.”
He said the vote to accept CEO Elon Musk’s $1 trillion compensation plan means investors should expect to get diluted further — meaning that that these additional shares water down their ownership of the company. The package had 75% approval among voting shares, despite proxy advisors Glass Lewis and ISS coming out against it.
“With recent news of Elon Musk’s $1 trillion dollar pay package, dilution is certain to continue,” Burry wrote.
Tesla in 2025
Tesla’s market cap is currently $1.43 trillion. The electric vehicle maker’s shares have added more than 6% so far in 2025, while the S&P 500 has surged more than 15% in the same period.
Burry noted that moving past dilution “is not easy” for businesses. He also pointed to Palantir and Amazon as other well-known technology companies that dilute their shares through employee-based compensation, a practice that Burry said “penalizes shareholders.”
The newsletter post goes into an in-depth explanation of how stock-based compensation is not accurately reflected under Generally Accepted Accounting Principles (GAAP) and how companies used “adjusted” earnings to present a bottom line that wrongly ignores the practice as a real expense.
Burry quotes Warren Buffett’s view of stock-based compensation being treated as something other than a tangible expense: “What else could it be — a gift from shareholders?” wrote Buffett in his Berkshire Hathaway 2018 annual letter.
Burry launched his Substack called “Cassandra Unchained” late last month after deregistering hedge fund Scion Asset Management. The blog, which has a $379 annual subscription fee, has so far focused on why he believes artificial intelligence is a bubble.
