Michael Burry has issued a sharp warning about Tesla’s valuation. In a recent post on his Substack newsletter, Burry declared that Tesla’s stock is “ridiculously overvalued today” and argued that structural risks—including share-dilution and sky-high expectations—make the electric-vehicle maker a risky bet. Reuters
🔎 Why Burry Thinks Tesla’s Valuation Is Unjustified
- Share dilution — Burry estimates that Tesla dilutes its shareholders by roughly 3.6% per year, mainly because of new share issuances tied to stock-based compensation, and notes that the company isn’t doing buybacks to offset the dilution.
- Elon Musk’s pay package risk — He criticizes the recently approved pay deal for Tesla’s CEO, Elon Musk, saying the potential $1 trillion pay package could worsen dilution and erode long-term shareholder value if all performance milestones are met.
- Valuation far above peers — According to Burry, Tesla’s market capitalization and forward-earnings multiple remain well above what typical automakers or tech firms command, suggesting the current price rests heavily on growth expectations rather than fundamentals.
📈 What This Means for Tesla & Market Sentiment
Burry’s critique adds to growing caution among some investors and analysts about high-valuation, high-expectation tech/EV firms. For Tesla, this could mean:
- Increased volatility — Negative assessments like Burry’s could weigh on investor sentiment and cause sharper swings in stock price.
- Scrutiny on long-term promises — As Tesla pursues ambitious goals (robotaxis, AI, HVAs), such scrutiny might push shareholders to demand clearer paths to profitability, not just hype.
- Revaluation pressure — If Tesla fails to meet growth or performance targets, valuation multiples — currently rich — may come under pressure, potentially leading to a downward adjustment.
Still, Tesla’s past resilience and broad investor base mean the company isn’t guaranteed to fall simply because of a critical opinion.
🧠 What to Watch Next
- Whether other prominent investors echo Burry’s view or counter with bullish arguments.
- Performance indicators: cash flow, delivery numbers, execution on new projects (robotics/AI/vehicles) — whether they justify current valuation.
- Share-issuance data and dilution metrics — how quickly new liquidity (stock-based compensation, pay plans) is impacting per-share value.
