Michael Burry of ‘Big Short’ fame takes on Elon Musk; bets half a billion dollars against Tesla

By: |
May 18, 2021 4:41 PM

The put options against 800,100 shares of Tesla, placed by Michael Burry, were seen as of March 31.

Elon musk, teslaEarlier in December, Michael Burry, on Twitter had said that Tesla’s reliance on regulatory credits to generate profit was a red flag. (Image: REUTERS)

Famous investor Michael Burry has disclosed a short position against Elon Musk’s Tesla Inc on shares worth $534 million. Recent filings with the US capital market regulator Securities and Exchange Commission (SEC) showed that Michael Burry’s Scion Asset Management has long put options against 800,100 shares of the electric car manufacturer. Michael Burry was among those who called out the subprime mortgage crisis of 2007 and made billions betting against mortgage securities. Michael Burry was played by Christian Bale in the movie based on Michael Lewis’s book on the 2008 financial crisis, ‘The Big Short’.

The put options against 800,100 shares of Tesla, placed by Michael Burry, were seen as of March 31. These give Burry’s Scion Asset Management the right to sell Tesla shares at a specified strike price on or before a certain date. Investors holding put positions stand to benefit if the price of the underlying security falls. Michael Burry will only stand to benefit if Tesla shares fall below the determined price by the specified date. The price and date have not been disclosed by Scion Asset management.

Earlier in December, Michael Burry, on Twitter had said that Tesla’s reliance on regulatory credits to generate profit was a red flag, CNBC reported. Tesla only generates profits at present by selling tax credits to other auto manufacturers. However, this could change as more and more car manufacturers come up with their electric cars and competition increases for Tesla. They added that in the first quarter of this year, Tesla reported $518 million in regulatory credit sales. Burry had back then said that Tesla stock price was “ridiculous”.

Tesla’s share price skyrocketed a massive 755% between the end of March last year and the first half of January this year. Since then stock has fallen 35% to now trade at $576 apiece.

Meanwhile, Cathie Wood of ARK Invest is among those bullish on the stock. Earlier this year in March, analysts at ARK Invest said that post the pandemic, Elon Musk’s Tesla could surge more than 400% from current levels by 2025 to reach a target price of $3,000 per share. The post said that ARK Invest sees a 50% possibility of Tesla hitting $3,000 apiece price. They see a 25% possibility of the stock quoting $1,500 by 2025 and 25% possibility of it hitting $4,000 apiece — their bull case.

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