Michael Burry of ‘The Big Short’ reveals a $530 million bet against Tesla

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Michael Burry

Renowned investor Michael Burry on Monday disclosed in a regulatory filing a short position against Tesla worth more than half a billion.

Burry, one of the first investors to learn about and profit from the subprime mortgage crisis, has long puts against Tesla’s 800,100 shares or $534 million by the end of the first quarter, according to a filing with the Securities and Exchange Commission.

Investors profit from puts when the underlying securities fall in value. As of March 31, Barry owned 8,001 put contracts with an unknown value, strike price or expiration date, the filing said.

Michael Burry

Tesla stock fell more than 4 percent on Monday, bringing its losses over the past month to nearly 20 percent.

Burry, whose firm is called Scion Asset Management, became famous for betting against mortgage-backed securities before the 2008 crisis. Burry was portrayed in Michael Lewis’ book “The Big Short” and in the Oscar-winning film of the same name.

Tesla is having a turbulent 2021 amid a sales slump in China in April and a parts shortage that has hampered production in both the U.S. and China.

Burry had previously mentioned in a tweet, which he later deleted, that Tesla’s reliance on regulatory loans to generate profits was a wake-up call.

As more automakers produce their own battery cars, supposedly fewer of them will have to buy environmental credits from Tesla, which they have been doing to meet environmental regulations.

In addition to the “big short,” Barry recently snapped up the GameStop long position when the Reddit favorite made Wall Street history with a massive short squeeze.

In the first quarter of 2021, Tesla reported selling $518 million in regulatory loans that Elon Musk’s company typically receives from government programs to support renewable energy. It sold them to other automakers, notably FCA (now Stellantis), when they needed credits to offset their own carbon footprint.

In the fourth quarter of 2020, Tesla made a net profit of $270 million by selling $401 million in regulatory credits to other automakers.

Historically, Tesla has accumulated about $1.6 billion in energy credits, mostly zero-emission car credits, which has helped the company show profitability for more than four consecutive quarters, qualifying the automaker for inclusion in the S&P 500 index.

Tesla is currently delaying production and delivery of updated versions of its high-end sedan and SUV Model S and X, respectively. In addition, commercial production of custom-designed “4680” battery cells for use in upcoming vehicles, including the Cybertruck and Tesla Semi, has been delayed.

Meanwhile, Musk’s electric car venture is facing regulatory inspections in China and the U.S., and high-profile car accidents have led to negative publicity and investigations by vehicle safety authorities in both countries.

Many believe that CEO Musk’s tweets about bitcoin and prehecoin have also contributed to the volatility of Tesla stock. Musk has tens of millions of followers on Twitter.

Musk, a supporter of cryptocurrencies in general, announced last week that Tesla was indefinitely suspending acceptance of bitcoin as payment for cars, saying he was concerned about the “rapidly growing use of fossil fuels for bitcoin mining and transactions.” Earlier this year, Tesla said it bought $1.5 billion worth of bitcoin.

Tesla stock is down nearly 20 percent in 2021 after skyrocketing 740 percent in 2020.

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