‘Tesla is ridiculously overvalued’: Big Short investor Michael Burry warns Musk’s $1 trillion payout will erode value | Business

Big Short investor Michael Burry has cast doubt on Tesla’s lofty valuation and warned that CEO Elon Musk’s newly approved $1 trillion compensation package could place even more strain on shareholder returns. In a weekend post on his Substack newsletter, Burry wrote that the electric-vehicle maker’s market value is “ridiculously overvalued” and has been “for a good long time”. His critique focuses largely on how Tesla and other tech firms account for stock-based compensation, which he believes distorts the way investors perceive true profitability.

Michael Burry says dilution is eating into Tesla’s real worth

Burry explained that Tesla’s share count increases by roughly 3.6% each year because the company routinely awards employees significant amounts of stock. Since Tesla does not buy back shares to counterbalance these awards, existing shareholders effectively own a smaller slice of the company each year.He shared a chart with his subscribers to illustrate how this steady dilution can erode a company’s present value, especially over long periods. According to Burry, when the real cost of stock-based compensation is fully considered, Tesla’s valuation looks much less defensible than its headline numbers suggest.He also pointed to Musk’s newly approved pay package as a major accelerant. The plan, which passed with 75% shareholder support, could give Musk tens or even hundreds of millions of new Tesla shares if performance targets are met. This could take Musk’s personal stake from 15% to roughly 29%, reducing the ownership percentage of every other shareholder.“Dilution is certain to continue,” Burry wrote, adding that this structural issue is a core reason he believes Tesla’s market value is disconnected from reality.

A broader critique of tech’s accounting habits

Burry directed part of his criticism at the wider technology industry. He said many tech companies remove stock-based compensation from their “adjusted” earnings results, creating a version of profitability that overlooks a major recurring expense. He argued that companies such as Tesla, Amazon and Palantir routinely benefit from this practice because it makes their financial performance appear healthier than it truly is.He reinforced his point by referencing Warren Buffett, who has long argued that stock-based pay is a real cost to shareholders and should never be treated as an optional footnote.

Market reaction and mixed sentiment

Tesla’s share price dipped slightly after Burry’s comments circulated, although the stock is still up more than 6% this year. Tesla remains valued at about $1.43 trillion.Burry also commented on Tesla’s shifting identity. He said the company’s strongest supporters have changed their narrative repeatedly over the years, moving from electric vehicles to autonomous driving and now to humanoid robots. In his view, this frequent repositioning reflects a company that is constantly searching for its next big justification for growth.The remarks were published on Burry’s newly launched Substack, Cassandra Unchained, which he started after deregistering Scion Asset Management. Many of his recent posts focus on what he believes are emerging bubbles in multiple sectors, particularly artificial intelligence.