Michael Burry, the investor known for his call on the 2000s housing market bubble, has taken aim at Tesla's valuation, calling it 'ridiculously overvalued'. In a recent Substack newsletter, Burry criticized the tech industry's widespread practice of issuing stock-based compensation and excluding it from earnings results. He argues that this practice leads to a misrepresentation of true profits and negative dilution of the company's value over time. Burry claims that Tesla's market capitalization is significantly inflated, with a 3.6% annual dilution rate and no buybacks. He further highlights the controversial $1 trillion compensation plan for Elon Musk, which received 75% approval from voting shares, despite opposition from proxy advisors. Burry warns that this dilution will continue, and he points to other tech giants like Palantir and Amazon as examples of similar practices. The newsletter delves into the debate over stock-based compensation, questioning its treatment under Generally Accepted Accounting Principles (GAAP). Burry quotes Warren Buffett's perspective, suggesting that stock-based compensation should be considered a tangible expense, not a gift from shareholders. Burry's Substack, 'Cassandra Unchained', focuses on his views on the AI bubble, and he launched it after deregistering his hedge fund, Scion Asset Management.
