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Michael Burry of 'The Big Short' revealed a $530 million bet against Tesla

Michael Burry of 'The Big Short' revealed a $530 million bet against Tesla

May 19, 2021: On Monday, Famed investor Michael Burry revealed a short position against Tesla worth over half a billion in a regulatory filing.

According to the filing with the U.S. Securities and Exchange Commission, Burry is one of the first investors to call and profit from the subprime mortgage crisis, puts against $534 million by the end of the first quarter.

According to the filing, investors profit from puts when the underlying securities fall in price. On March 31, Burry owned 8,001 put contracts with unknown value, strike price, or expiry.

On Monday, shares of Tesla fell more than 4%, bringing its month-to-date losses to nearly 20%.

Tesla has had a turbulent 2021 between slumping sales in China and parts shortages that have impeded production in the U.S. and China.

Burry mentioned in a tweet, which he deleted later, that Tesla’s reliance on regulatory credits to generate profits is a flag in red color.

As the automakers produce battery-electric vehicles of their own, ostensibly lesser will need to purchase environmental regulatory credits from Tesla, which they did to become compliant with environmental regulations.

Tesla reported sales of $518 million of regulatory credits, which Elon Musk’s company receives from government programs to support renewable energy generally. It had sold these to other automakers, notably FCA when they needed credits to offset their carbon footprint.

Tesla has racked up around $1.6 billion in regulatory energy credits, primarily zero-emission vehicle credits, which helped the company report over four consecutive quarters of profitability, qualifying the automaker for addition to the S&P 500 index.

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

Musk, known as a proponent of cryptocurrency generally, announced that Tesla was indefinitely suspending the acceptance of bitcoin as payment for cars, saying he was concerned by the “rapidly increasing use of fossil fuels for Bitcoin mining and transactions.” Tesla revealed earlier this year that it bought $1.5 billion worth of bitcoin.

Tesla shares have dropped nearly 20% in 2021 after surging a whopping 740% in 2020.

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