Michael Burry says Tesla stock is 'ridiculously overvalued'

Core Viewpoint - Michael Burry considers Tesla to be significantly overvalued, arguing that its market capitalization is excessively high and that CEO Elon Musk's compensation plan will lead to further dilution for shareholders [1][2]. Group 1: Stock-Based Compensation - Burry's analysis highlights how stock-based compensation negatively impacts "owner's earnings" over time, positioning Tesla within this framework of "tragic algebra" [2]. - The compensation plan approved by Tesla shareholders could potentially be worth up to $1 trillion, contingent on achieving ambitious production and market-cap milestones, including a long-term valuation target of approximately $8.5 trillion [2]. Group 2: Valuation Concerns - Burry points out that Tesla's trailing P/E ratio is nearly 300, indicating that shareholders are paying a premium for a diminishing ownership stake in the company [3]. - He argues that the market is currently valuing Tesla as a market giant, despite the risks associated with its high valuation [3]. Group 3: Market Sentiment and Competition - Burry critiques the "Elon cult," suggesting that Tesla's loyal supporters shift their focus to new narratives whenever competition arises in its business lines, which leads to inflated valuations [4]. - He notes that the narrative around Tesla changes from electric cars to autonomous driving, and now to robots, each time a new competitive threat emerges [4]. Group 4: Historical Context - Burry has previously expressed bearish sentiments on Tesla, having disclosed significant put options against the company in 2021, which amounted to a notional $534 million bet at that time [5]. - His recent Substack post does not indicate new options on Tesla but reinforces his broader argument that the market is again paying bubble prices for companies expected to grow consistently [6].