Here’s a bold statement: Tesla’s valuation might be one of the most overhyped stories in the tech world today. But here’s where it gets controversial—Michael Burry, the investor who famously predicted the 2008 housing market crash in The Big Short, is calling out not just Tesla, but the entire tech industry for a practice he believes is misleading investors. And this is the part most people miss: the widespread use of stock-based compensation, which companies often exclude from their earnings reports, could be artificially inflating valuations across the board.
Burry, who recently launched his paid Substack newsletter Cassandra Unchained, argues that when you factor in the true cost of stock-based compensation—and the dilution it causes to shareholders—companies like Tesla should be valued far lower than they are today. He writes, ‘Tesla’s market capitalization is ridiculously overvalued, and it has been for far too long.’ To drive his point home, Burry highlights that Tesla dilutes its shareholders at a rate of 3.6% annually, without offering buybacks to offset the impact. He even shared a chart with subscribers to illustrate the long-term value destruction this dilution can cause.
But it doesn’t stop there. Burry points to Elon Musk’s staggering $1 trillion compensation package, which was approved by 75% of Tesla shareholders despite opposition from proxy advisors. ‘With this package, dilution is certain to continue,’ Burry warns. In simpler terms, issuing more shares to pay Musk waters down existing shareholders’ ownership stakes—a practice Burry calls ‘penalizing shareholders.’
To put Tesla’s valuation in perspective, its market cap currently sits at $1.43 trillion, with shares up over 6% in 2025. Meanwhile, the S&P 500 has surged more than 15% in the same period. Burry isn’t just singling out Tesla; he also calls out tech giants like Palantir and Amazon for similar practices. He dives deep into how stock-based compensation is often swept under the rug in financial reporting, with companies using ‘adjusted’ earnings to mask what should be treated as a real expense.
Here’s a thought-provoking question: Is stock-based compensation a clever accounting trick or a legitimate cost that investors are being misled about? Burry sides with Warren Buffett, who famously quipped, ‘What else could it be—a gift from shareholders?’ in his 2018 Berkshire Hathaway letter. Burry’s Substack, which costs $379 annually, has so far focused on his belief that artificial intelligence is another bubble waiting to burst. But his critique of stock-based compensation might just be the more immediate wake-up call for investors.
So, what do you think? Is Burry onto something, or is he overstating the risks? Let’s debate it in the comments—this is one conversation you won’t want to miss.
