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- Michael Burry suggested Elon Musk might want to sell some Tesla stock to cover his personal debts.
- The "Big Short" investor noted that the Tesla CEO had 88 million shares pledged as loan collateral.
- Burry also subtly compared today's market to the Dutch tulip bubble.
Michael Burry rejoined Twitter this week to suggest why Elon Musk was suddenly interested in selling Tesla stock and to sound the alarm on dangerous speculation in financial markets.
Musk's debts
"Regarding what @elonmusk NEEDS to sell because of the proposed unrealized gains tax, or to #solveworldhunger, or ... well, there is the matter of the tax-free cash he took out in the form of personal loans backed by 88.3 million of his shares at June 30th," the investor tweeted.
Musk recently offered to sell $6 billion worth of Tesla stock if United Nations bosses could explain to him how the sum would solve world hunger. The Tesla CEO also launched a Twitter poll asking whether he should sell 10% of his holdings, citing pressure from US lawmakers pushing for a "billionaire tax" that would target the ultrawealthy's unrealized stock gains.
Burry's tweet implied that those might just be excuses. The investor of "The Big Short" fame and head of Scion Asset Management posted a link to a Securities and Exchange Commission filing in August that said Musk had pledged about 88 million shares, or 36% of his total stake, as collateral for personal loans as of June 30.
Musk had 41% of his shares pledged as collateral for his debts at the end of December, and 48% as of June 30 last year, previous filings show.
Burry appeared to be suggesting that Musk isn't eyeing a stock sale in order to feed millions of people, in response to a legislative proposal, or because he could face a $10 billion tax bill when he exercises a slew of stock options that expire in August 2022.
Instead, Burry's theory is that Musk needs some cash to service the loans he's taken out using his Tesla stock. That practice drew heavy scrutiny this summer after a ProPublica investigation detailed how some of the world's wealthiest people borrowed against their stock to minimize their tax burdens.
Bubble fears
Besides tweeting about Musk, Burry marked his return to Twitter with a new header image. His choice of "Satire of Tulip Mania," a painting by Jan Brueghel the Younger that ridicules the Dutch tulip bubble in the 1600s, was undoubtedly a warning about the current market mania.
The painting depicts tulip speculators as mindless monkeys and shows them weighing the bulbs, counting money, taking inventory, and going into debt, fighting over, and even dying for the flowers.
Burry has painted the immense hype around meme stocks and cryptocurrencies and the frantic buying of Tesla shares and other assets as clear signs of rampant speculation.
Moreover, Burry has in recent months diagnosed a historic market bubble and predicted a devastating crash. His fund also held bearish put options on shares of Tesla and Cathie Wood's Ark Invest at the end of June. Given that context, his choice of Twitter image suggests he sees history repeating itself.
Musk and Tesla did not immediately respond to a request for comment from Insider.
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November 10, 2021 at 12:13AM
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'Big Short' Michael Burry tweets about Elon Musk, Tesla stock, bubbles - Markets Insider
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