Michael Burry ramps up criticism, says Tesla is overvalued

In a detailed post on his “Cassandra Unchained” newsletter Burry argued that Tesla’s valuation has been stretched for “a good long time,” pointing to a forward price-to-earnings multiple of about 209, compared with roughly 22 for the S&P 500 and around 94 for Tesla’s own historical average. He said the company issues so much stock that investors are diluted by roughly 3.6% per year, with no share buybacks to offset the effect.

Burry tied that dilution to a compensation plan that could grant Musk up to $1 trillion in stock over 10 years if Tesla hits a series of ambitious performance milestones. The package, approved by shareholders in early November, adds to Musk’s status as the world’s richest person and, in Burry’s view, raises questions about how much equity can be issued before long-term holders see their share of future earnings meaningfully eroded.

The investor, who shut down his hedge fund Scion Asset Management earlier this year after returning capital to clients, framed Tesla as part of a broader concern about high-flying technology and artificial intelligence names. In recent months he has criticized companies such as Nvidia and Palantir, accusing parts of the AI and cloud-computing boom of relying on aggressive assumptions and accounting to justify steep valuations.

“Tesla’s market capitalization is ridiculously overvalued today and has been for a good long time,” Burry wrote, adding that valuation models that depend on perpetually high growth and ultra-low discount rates amount to “fantasy” rather than fundamentals. He included a present-value formula in his note to illustrate how sensitive such models are to small changes in growth or interest-rate assumptions.

Burry’s latest critique marks a renewed bearish stance on a company he has challenged before. He held a well-publicized bearish options position against Tesla in 2021 before later exiting, and has since become one of the most recognizable skeptics of speculative booms after his successful bet against subprime mortgage securities ahead of the 2008 financial crisis.

Tesla, which has leaned heavily on stock-based compensation during its rapid expansion, has not announced plans for buybacks to counteract that dilution. The company’s share price surged earlier this year alongside optimism about its artificial intelligence, robotics and robotaxi ambitions, helping push Musk’s net worth above $500 billion in October, before retreating amid a wider pullback in technology and AI-related stocks.

Warning comes at a time when some large institutional investors are also questioning the scale and structure of Musk’s pay. One major sovereign wealth fund has already said it will vote against the package, and corporate-governance advocates have raised concerns about tying such a large award to market-value milestones that can be influenced by sentiment and liquidity as much as by operating performance.

For now, the blog post adds another outspoken voice to an increasingly polarized debate around Tesla’s valuation. Supporters point to the company’s role in electric vehicles, energy storage and AI-driven robotics, while critics like Burry argue that even strong execution may not be enough to justify a multiple that still towers over most of the equity market, especially with a trillion-dollar compensation plan sitting on top of it.