Michael Burry Calls Tesla 'Lord Of The Tragic Tier,' Warns Musk’s Giant Pay Package Is Enough To Distort Nasdaq Earnings

• Burry called Tesla the “Lord of the Tragic Tier,” where compensation costs exceeded cumulative net income.
• He said removing Tesla reduces Nasdaq-100 earnings overstatement under GAAP from 19.78% to 12.52%.
• Burry also said Tesla’s newer incentive framework could ultimately reach $1 trillion.

Michael Burry, the money manager made famous by “The Big Short”, said Tesla’s (TSLA) massive stock-based compensation, including incentive packages tied to CEO Elon Musk, is large enough to distort earnings math across the Nasdaq-100 Index.

Over the past year, TSLA stock has outperformed the Invesco QQQ Trust (QQQ), rising 49% compared with 40% gains for the ETF that tracks the Nasdaq-100 Index.

Burry Calls Tesla ‘Lord Of The Tragic Tier’

As part of an analysis based on nearly a decade of audited filings from major tech companies, Burry called Tesla the “Lord of the Tragic Tier,” which he describes as a group of companies in which stock-based compensation exceeded both GAAP stock-based compensation expense and cumulative net income. Simply put, these are companies where paying employees in stock has cost more than they've ever earned.

“Elon Musk’s massive stock-based comp package is so big it distorts an index of 96 other heavy stock-based compensation users,” he wrote. According to his analysis, removing Tesla from the dataset reduces the overstatement of Nasdaq-100 earnings under GAAP from 19.78% to 12.52%. He tied much of that impact to Musk’s 2018 performance-based compensation package, originally valued at about $56 billion, one of the largest executive incentive plans in public market history.

Musk’s Tesla Pay Plan Could Hit $1 Trillion

Burry said Tesla’s newer long-term incentive structure tied to valuation and operational milestones could ultimately reach $1 trillion, saying it would “dwarf everything in my data set, even Tesla’s own epic deadweight.”

Tesla shareholders approved the framework last year with over 75% of votes cast in favor. The structure could allow Musk to increase his ownership stake in Tesla to 25% or more if long-term targets are achieved. These milestones include scaling Tesla toward a potential $8.5 trillion market value, a roughly sixfold jump from current levels, which could raise the value of Musk’s Tesla holdings to $2.4 trillion if targets are met.

Meanwhile, a potential SpaceX IPO could further boost Musk’s fortune. The offering is expected to value SpaceX at about $1.75 trillion, and with Musk holding a 43% stake, the listing alone could push his net worth above $1 trillion. If Tesla and SpaceX are not ultimately merged, Musk could lead two companies valued at $1 trillion or more simultaneously, with Tesla already carrying a market cap of about $1.4 trillion.

Earnings Distortion Across Large-Cap Tech

Burry’s “Tragic Tier” includes Datadog, Workday, Axon Enterprise, Shopify, Palantir, Marvell Technology, CrowdStrike, and Zscaler. He said that the stock-based compensation inflates valuation metrics across large-cap tech benchmarks.

“These nine have proven over the time they have been public on this green earth that they can issue stock to a degree that the true cost of stock-based compensation can be expected to exceed earnings,” Burry said.

Across the group, $42 billion in net income reported under GAAP translated into a negative $267 billion in owners’ earnings after adjusting for stock-based compensation using his methodology.

“No other single company, even in its egregious compensation of its employees, let alone one Chief Executive, comes close to Tesla,” Burry added.

His analysis estimates that, under GAAP, Nasdaq-100 companies overstated shareholder-attributable earnings by 19.78%, while Wall Street-adjusted earnings overstated them by 42.12% over the past decade. Burry said that of every $1 of earnings per share reported under GAAP, shareholders captured only about $0.83.

How Do Retail Traders Feel About TSLA?

On Stocktwits, retail sentiment for Tesla has remained in the ‘bearish’ and ‘extremely bearish’ zones over the past week since the company missed its recent first-quarter delivery estimates amid ‘high’ message volume.

TSLA stock has tanked 23% so far this year, ranking as the second-worst performer among the “Magnificent Seven” group of equities.

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