Short gamblers against Tesla lost a record of $40 billion in 2020 after the stock soared more than 700%
Dr. Burry states, "Enjoy it as long as it lasts."
Dr. Michael Burry is an investor who made close to a billion dollars from a bet against the U.S. housing market before the 2008 crisis. Now he is betting on a similar collapse of electric car maker, Tesla.
As a footnote: The Oscar-winning film "The Big Short" based on his story.
Burry, the character in "The Big Short" was played by Christian Bale and adopted the username "Cassandra"on Twitter, a Greek mythology prophetess whose prophecies no one believed, even though they were true.
"Well, my last big-short grew, and grew, and grew…" wrote Burry, founder and CEO of Scion Capital in a tweet on his Twitter account. The jump in Tesla's market capitalization on Friday alone was $60 billion, equivalent to the value of General Motors, twice the value of Hershey, three times that of Etsy, four times that of Dominos, and 10 from Vornado “...enjoy it as long as it lasts…" he wrote. Monday, Jan 25, at 3:31 the stock gained $22.8.
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Moreover, Tesla's market capitalization is now higher than the aggregate market capitalization of the top 10 car manufacturers in sales, although Tesla's sales account for less than 1% of global car sales.
Burry revealed about a month ago that he had entered a short position on Tesla shares. Meaning that he bet that the share price would fall. At the same time, he called on Tesla CEO, billionaire entrepreneur Elon Musk, to sell more of the company shares to take advantage of the current "ridiculous price level".
Tesla supporters may dismiss Burry's forecast for the stock's fall, but Burry is accustomed to such reactions. In 2005, when he identified the dangerous bubble in the real estate market and concluded that high-risk mortgage borrowers would fail to repay the loans and reach insolvency, he was rejected.
It took almost three years for Burry's bet to bear fruit. During this period, he faced demands from investors asked to return their money. He was forced to pay hundreds of millions of dollars in insurance premiums to banks, from which he purchased interest rate swaps (CDS) through a real estate market bet.
However, after his prediction came true and the market collapsed, he earned $750 million for his investors and another $100 million in person.
The short-listers who bet against Tesla lost $40 billion during 2020.
Investors who took short positions in Tesla shares lost $40.1 billion in 2020, according to an analysis conducted by S3 Partners, CNN Business reported on Tuesday. It is the highest annual loss ever recorded by short-listers on any stock.
Tesla shares soared last year by 743%, and another 25% since early 2021, amid a series of profitable Tesla quarters. Tesla joins the S&P 500 and created enthusiastic responses on Wall Street for both institutional and retail investors.
The highs broken by Tesla shares made the Musk founder the richest man globally, ranking Tesla fifth in the list of the largest companies in the U.S. in terms of market capitalization - after Apple, Microsoft, Amazon, and Alphabet (Google's parent company).
Last month, Musk himself warned in a letter to company employees that if they failed to cut costs, the company's stock could be crushed like a "souffle cake under a hammer…". "In times like these, when our stock is breaking records, it may seem that careful management of expenses is not as important. That is certainly not true!" Musk wrote in an email sent to company employees whose software was leaked to the media.
"When looking at our actual profitability, it is low and has been around 1% in the past year," Musk continued, referring to the company's profit margin. "Investors give us a lot of credit based on future profitability, but if, at some point, they conclude that this is not going to happen, our stock will immediately be crushed like a souffle cake under a hammer!”