Michael Burry, renowned for his prescient insights into the 2008 financial crisis, disclosed on Tuesday that he has no current stake in SpaceX. Despite acknowledging the existence of bearish options strategies against the company, Burry indicated that the cost of such wagers remains prohibitive, even as he expressed skepticism regarding SpaceX’s commanding valuation, which hovers near the $3 trillion mark.
The investor, whose acute foresight regarding the subprime mortgage market became legendary, stated he had meticulously examined various put options on SpaceX but ultimately opted against participating in any of these trades.
“I am not involved with SpaceX now. Neither short nor, ahem, long,” he articulated in a recent SubStack publication.
Burry highlighted a specific put option with a $100 strike price, set to expire in December 2028, which was quoted at approximately $25 per contract, with the underlying stock trading around $212. He noted that a comparable contract with a June 2027 expiration carried a price tag of roughly $13, while a December 2026 put was trading at approximately $6.75.
“Tempted by that one. But no thank you,” Burry commented on the shorter-dated option, adding, “With any luck SPCX will settle up here in the mid $200s and vol will drain out of put option chain.”
Valuation Concerns
Nevertheless, Burry voiced significant reservations about the magnitude of the company’s valuation. He characterized SpaceX as being “fundamentally a small space company, a niche telecom, a bedeviled social media company, and a Coreweave-light,” generating less than $20 billion in annual revenue.
He posited that the company’s market capitalization has ascended to levels that overshadow numerous established corporations and significant wealth accumulations. Burry pointed out that SpaceX’s current market value surpasses that of Warren Buffett’s Berkshire Hathaway and exceeds the aggregate market capitalization of many entire industries and national economies.
“Berkshire Hathaway has been eclipsed 2 1/2 times over in just three days. Berkshire Hathaway, painstakingly assembled over two century-old lives. The two greatest investors of our time,” Burry remarked.
Market Dynamics and Broader Economic Commentary
These observations contribute to an intensifying discourse surrounding the equity markets’ perception of SpaceX’s multifaceted business operations, which encompass launch services, satellite internet, and social media ventures, particularly in the wake of one of the most anticipated public offerings in recent memory.
Following a remarkably successful initial public offering, shares of SpaceX experienced a notable surge of 20% on their inaugural full trading day and have since appreciated by over 25% on a week-to-date basis. This significant IPO event propelled Elon Musk into the ranks of the world’s first trillionaires.
In a related development last month, Burry cautioned investors against excessive exposure to the rapidly appreciating technology sector, advocating for investors to “reject greed.” He argued that the fervent enthusiasm surrounding artificial intelligence and momentum-driven trading strategies were artificially inflating valuations to unsustainable levels. For months, he has been issuing warnings that the stock market’s pronounced fixation on AI bears a striking resemblance to the speculative excesses observed during the latter stages of the dot-com bubble.
Business Style Takeaway: Michael Burry’s commentary underscores a critical strategic imperative for investors: a rigorous assessment of valuation against underlying fundamentals, especially in high-growth, nascent industries. The exorbitant valuations of companies like SpaceX, detached from traditional revenue multiples, highlight the speculative nature of current market sentiment and necessitate a cautious approach to avoid potential overextension and subsequent corrections.
Information compiled from materials : www.cnbc.com