[imagesource: Tony Avelar / Bloomberg]

Let’s start with some background on Michael Burry.

He attended medical school, following which he worked as a Stanford Hospital neurology resident and then a Stanford Hospital pathology resident, before giving it all up to start his own hedge fund.

He built up his reputation and then started the (now defunct) hedge fund Scion Capital, funded by inheritance and loans from his family. By the end of 2004, he was managing $600 million and turning money away.

Fast forward to 2007, and he gained renown as the first person to predict the United States subprime mortgage crisis, a multinational financial crisis between 2007 and 2010.

He would later be played by Christian Bale in the film The Big Short which chronicled these events, elevating him to international fame.

In other words, when this guy makes a prediction, people listen.

When he tweeted on Tuesday that he is “short Tesla”, reports Business Insider, and advised Elon Musk to issue more shares while they sit at their “current ridiculous” levels, more than a few folks sat up in their chairs:

So, @elonmusk, yes, I’m short $TSLA, but some free advice for a good guy….Seriously, issue 25-50% of your shares at the current ridiculous price. That’s not dilution. You’d be cementing permanence and untold optionality. If there are buyers, sell that #TeslaSouffle. pic.twitter.com/Lt5TlZinQU

— Mike Burry (@michaeljburry) December 2, 2020

The tweet has since been deleted, along with the spreadsheet detailing Tesla’s financial performance against older automakers, so we’ll repeat what he said:

“So, @elonmusk, yes, I’m short $TSLA, but some free advice for a good guy … Seriously, issue 25-50% of your shares at the current ridiculous price. That’s not dilution,” Burry tweeted.

He continued: “You’d be cementing permanence and untold optionality. If there are buyers, sell that #TeslaSouffle.”

The investor has also highlighted Tesla’s thin margins and questioned the rationality of its industry-leading market cap.

We’ll get to what a ‘Tesla soufflé’ is in a minute.

First, it’s worth noting that Tesla shares have risen more than 575% this year to date, which was boosted by the company’s upcoming inclusion in the S&P 500 and fading profitability concerns. Even some of the market’s harshest analysts have found themselves warming to it.

Not everyone is a convert, though, and Burry clearly isn’t impressed.

So, about that soufflé.

Per CNN, Burry is referencing an email that Musk allegedly sent to his employees saying that Tesla’s actual profit margin is fairly low at only roughly one percent, and that the stock price is due to investor expectations of future profits rather than recent results.

“If, at any point, they conclude that’s not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer!” he wrote in the email, which was first reported by Electrek.

The email encouraged employees to find even the smallest cost savings in the car manufacturing process.

Tesla did not respond to a request for comment about the email.

So, is Burry right?

Time will tell.

[sources:businessinsider&cnn]