Michael Burry, the “Big Short” money manager and investor who made millions by betting against subprime-mortgage bonds ahead of the 2008 US housing meltdown and was immortalized in Michael Lewis’ book “The Big Short,” predicted that Tesla stock would suffer a similar downfall.
Michael Burry in a tweet on Thursday wrote “Well, my last Big Short got bigger and bigger and BIGGER too…$TSLA”
The Scion Asset Management founder and boss continued, “adding $60 billion to its market capitalization – equivalent to “1 GM, 2 Hersheys, 3 Etsys, 4 Dominos, 10 Vornados”.
“Enjoy it while it lasts,” he added.
The automaker climbed as much as 7% on Friday to trade at $876 per share, marking an eleventh consecutive day of gains for the stock. Tesla shares now sit about 18% higher year-to-date, already mirroring the massive returns seen throughout 2020, granting the automaker a bigger market cap than Facebook and making Musk the richest man in the world.
Tesla Inc. shares had an incredible year in 2020, as it returned 696.45% in the year as it became the darling of investors and exceeded nearly all Wall Street forecasts.
In December 2020, Burry disclosed that he was shorting Tesla. At the time, he called for CEO Elon Musk to capitalize on his electric-vehicle company’s “current ridiculous price” by issuing shares. “Sell that #TeslaSouffle,” he added.
In a now deleted tweet “So, @elonmusk, yes, I’m short $TSLA, but some free advice for a good guy… Seriously, issue 25-50% of your shares at the current ridiculous price. That’s not dilution.”
Read: $38 billion and $2.9 billion, That is what Tesla short-sellers lost in 2020 and 2019
In the third quarter of 2020, Burry sold 50% of his bullish options positions in Alphabet and Facebook according to a 13F filed with the Securities and Exchange Commission this week.
He also sold 38% of his fund’s position in video game retailer GameStop.
Read: Here’s where five analysts say Tesla shares are headed in 2021
However, despite selling a substantial amount in Google’s parent firm, Alphabet remains the largest call position in his fund at $58 million, making up 17.8% of his $330 million portfolio. He spent $113 million to buy 80,000 call options on Google.
Burry was almost universally dismissed when he predicted that the housing bubble would burst and began snapping up credit-default swaps on subprime-mortgage bonds in May 2005.
A wave of mortgage defaults eventually tanked the housing market in 2007, and Michael Burry personally raked in $100 million and made $750 million in profits for his investors.
By: Ifunanya Ikueze
