Michael Burry of ‘The Big Short’ reveals a $530M bet against Tesla

Post by recursive » Mon, May 17, 2021, 8:14 PM UTC

LeifCarrotson wrote: post #115

alex_young wrote: post #82

Earlier quoted context omitted.

> If you have an actual short position, your potential losses are unlimited. Isn’t this a bit like saying that the potential upside of holding any stock is unlimited?

No, and this distinction is critical to understanding the risk that short sellers take. To use a slightly anomalous stock which hasn't split as an easy example, if you had shorted $BRK in 1980 when the price was $300, the potential upside was just 100%: In your best outcome, they go bankrupt and the most you earn is $300. Unfortunately for you, Berkshire Hathaway shares are now worth $430,000, so your $300 or 100% up…

Post by zaat » Mon, May 17, 2021, 8:14 PM UTC

LeifCarrotson wrote: post #115

alex_young wrote: post #82

Earlier quoted context omitted.

> If you have an actual short position, your potential losses are unlimited. Isn’t this a bit like saying that the potential upside of holding any stock is unlimited?

No, and this distinction is critical to understanding the risk that short sellers take. To use a slightly anomalous stock which hasn't split as an easy example, if you had shorted $BRK in 1980 when the price was $300, the potential upside was just 100%: In your best outcome, they go bankrupt and the most you earn is $300. Unfortunately for you, Berkshire Hathaway shares are now worth $430,000, so your $300 or 100% up…

Post by ska » Mon, May 17, 2021, 8:18 PM UTC

Kranar wrote: post #139

hahaxdxd123 wrote: post #133

Earlier quoted context omitted.

Debt is a good thing for Ford! The majority of their debt comes from financing the sales of their cars to fleets, dealers, or consumers. This earned them 1.7B last year. Tesla's real advantage imo comes down to not having dealers eat into their margins. [1] https://en.wikipedia.org/wiki/Ford_Motor_Credit_Company

Yes, debt is a good thing for Ford which is why its market cap alone is not a good indicator of its value in this case. OPs entire point is that when you factor in the EV instead of the MC, Tesla still comes out looking good but within reason.

Post by socialist_coder » Mon, May 17, 2021, 8:22 PM UTC

6gvONxR4sf7o wrote: post #65

jeremydeanlakey wrote: post #17

> $530 million bet > long puts against 800,100 shares I find the title misleading. Unless I misunderstand, Michael Burry has not actually put $530M of his money at risk. He's made a much smaller, leveraged bet. $530M is just the notional value.

Can someone ELI5 how this works to those of us who only buy and sell things? I've looked up the definitions, but I'm curious about the purposes and practical risk/reward scenarios of this particular sort of bet.

Post by burnished » Mon, May 17, 2021, 8:25 PM UTC

LeifCarrotson wrote: post #115

alex_young wrote: post #82

Earlier quoted context omitted.

> If you have an actual short position, your potential losses are unlimited. Isn’t this a bit like saying that the potential upside of holding any stock is unlimited?

No, and this distinction is critical to understanding the risk that short sellers take. To use a slightly anomalous stock which hasn't split as an easy example, if you had shorted $BRK in 1980 when the price was $300, the potential upside was just 100%: In your best outcome, they go bankrupt and the most you earn is $300. Unfortunately for you, Berkshire Hathaway shares are now worth $430,000, so your $300 or 100% up…