Gene Munster comments on Michael Burry’s $530M bet against Tesla stock

By:
on May 18, 2021
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  • Michael Burry's family office revealed a $534 million worth of long put options on Tesla.
  • Gene Munster calls a short bet on Tesla as very risky.
  • Munster sees Tesla becoming a $2 trillion company over the next 5 years.

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Gene Munster, Loup Ventures founder and managing partner, called a short bet on Tesla Inc. (NASDAQ: TSLA) a very risky bet, in an interview on CNBC

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Shares of Tesla are down 18% over the past one month but up by about 260% over the past year. Its shares opened at $568 today morning and climbed 1.5% at the time of writing.

Michael Burry’s position on Tesla

Scion Asset Management, the family office run by the “Big Short” investor Michael Burry, disclosed in a regulatory filing on Monday that it has put options on 800,100 shares of Tesla Inc. as of the end of first quarter and were worth $534 million. 

Investors profit from puts when the underlying securities fall in prices.

Gene Munster’s take on the Short Bet

According to Gene Munster, Tesla is riding a secular theme. Electric vehicles have a strong growth trajectory ahead over the next decade and he considers it an ‘undeniable truth.’

Munster said he has been a sell side analyst for a long time and had many incorrect calls.

“When you are shorting a theme, it gets really dangerous,” he said. “The most frequent mistake I made as an analyst was making a recommendation based on valuation when there was a secular theme.”

Tesla in five years

Munster added that if Tesla was able to get to a global market share of 20%, it could become a much bigger company. It could potentially be a $2 trillion company. Tesla’s current valuation is around $566 billion. 

He said that Tesla’s business model is more like a  tech company’s model. The substance of the valuation case is that if they are successful with their hardware and software services, there’s a strong case that long-term investors will be rewarded.

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