One of the most famous and often eerily accurate investors in the world, Michael Berry - the man who predicted the mortgage crisis - has issued a grim and pessimistic forecast for Tesla's future. The former head of hedge fund Scion Asset Management used his Substack platform, Cassandra Unchained, to sharply criticize companies that rely too much on stock-based compensation, among which Nvidia and, of course, Tesla stand out.
According to Berry, these compensation programs hide real operating costs and, more importantly, erode shareholder value over time. The financier is adamant that many investors do not adequately account for senior management compensation paid in stock, including the mega-package of Elon Musk and that of Rivian CEO R. J. Skarina. For example, Skaryna's package gives him the right to buy up to 36.5 million shares of Rivian at a fixed price after the company meets a number of ambitious price and financial goals.
Berry argues that this compensation model is fundamentally flawed, as it leads to continuous "dilution" of the shares of existing shareholders. He and his colleagues have even developed a formula for calculating the degree of this dilution. According to their calculations, Tesla reduces the value for its shareholders by approximately 3.6% each year, provided that it does not buy back its own shares. For comparison, at Amazon this figure is about 1.3%, while at Palantir it reaches 4.6%.
Berry's analysis comes at an extremely crucial moment - shortly after more than 75% of Tesla shareholders approved Elon Musk's infamous compensation package, valued at a record one trillion dollars. This package is tied to achieving truly colossal goals over the next decade: producing 20 million cars, 10 million subscriptions for fully autonomous vehicles, and building one million humanoid robots and robo-taxis.
Berry believes that such a policy only deepens the erosion of shareholder value and does not reflect the true capitalization of the company, which he has long called “overvalued“. He also criticizes the change in Musk's rhetoric, who is increasingly positioning Tesla as an artificial intelligence and robotics company. According to the financier, this is simply a tactic to maintain the investment “cult around Musk“.
Despite the hawkish position of the famous investor, the majority of Wall Street analysts maintain their optimistic view of Tesla. Of the 44 analysts tracked by MarketBeat over the past 12 months, more than three-quarters recommend the stock as a "buy" or "hold." Some financial commentators, including Jim Cramer, see the company's focus on autonomous driving and robotics as a smart and far-sighted strategic move.