TLDR
- Michael Burry announced a short position against Tesla, labeling shares “ridiculously overvalued” at 200 times projected earnings
- Stock-based compensation dilutes Tesla shareholders 3.6% yearly without any buyback program in place
- Musk’s proposed $1 trillion compensation could create 300 million shares, intensifying dilution worries
- Tesla trades at $428.59 with technical indicators showing weakening momentum near $440 resistance
- November sales in France crashed 57.8% as European competitors capture market share
Michael Burry placed a bet against Tesla shares. The hedge fund manager known for calling the 2008 housing crash revealed his position through his Substack publication.
Burry labels the stock “ridiculously overvalued.” Tesla currently commands a price of nearly 200 times its forward 12-month earnings estimates. Few companies in any sector trade at such elevated multiples.
The investor zeroes in on shareholder dilution. Tesla issues stock-based compensation that erodes ownership by approximately 3.6% each year. No share repurchase program exists to balance this ongoing dilution.
Musk’s pay structure amplifies these concerns. The $1 trillion performance-based package could generate upwards of 300 million new shares. That represents a substantial hit to existing shareholder stakes.
Burry previously shorted Nvidia using similar reasoning. His approach targets high-flying tech names where compensation practices create ongoing dilution pressure. The strategy reflects skepticism about valuations disconnected from current fundamentals.
Institutional Opposition Mounts
Norges Bank Investment Management voted down the Musk compensation plan. The Norwegian fund oversees more than $1.7 trillion in global assets. Their opposition carries weight in corporate governance debates.
The fund identified three red flags: excessive size, shareholder dilution, and concentration risk around one individual. Their stance demonstrates that concerns extend beyond activist short sellers into the mainstream investment community.
Tesla’s stock performance trails the market substantially. Shares climbed only 6.5% this year against a 21% Nasdaq-100 gain. The gap highlights investor caution about growth assumptions embedded in the current price.
Price Action Shows Indecision
Tesla closed Monday at $428.59. The stock moves within a defined channel bounded by $400 support and $440 resistance. Volume has tapered off from peaks seen in October and early November.
The RSI indicator registers in the mid-50s. That neutral reading suggests neither bulls nor bears control the near-term direction. The 50-day moving average sits around $418 while the 200-day average anchors near $375.
Two critical price levels loom ahead. Breaking above $440 opens a path toward $460 to $480. Falling beneath $400 could accelerate selling pressure down to the $375 zone or potentially $350.
European Market Share Erodes
French Tesla registrations plummeted 57.8% in November compared to last year. Total units reached only 1,591 vehicles. Through eleven months, French sales trail by 33%.
The overall French auto market dipped just 4.9%. Tesla’s decline vastly outpaces the industry benchmark. Chinese manufacturer BYD plus European brands like Volkswagen and Stellantis gain ground.
Tareck Horchani at Maybank Securities notes Tesla prices in “an AI or robotaxi moonshot” scenario. Current multiples require flawless execution on ambitious technology roadmaps. Any stumble could trigger sharp repricing.
Burry deregistered his firm Scion Asset Management recently. This administrative change frees him to publish market commentary without regulatory constraints. His Substack becomes a direct channel to influence valuation debates.
Markets absorbed the news quietly. Shares finished Monday essentially unchanged and edged up roughly 1% in after-hours trading on alternative platforms.
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