Michael Burry, famed for his role in predicting the 2008 housing crisis and depicted in "The Big Short," recently stated that he has no current investments in SpaceX. In a post on SubStack, he explained that the costs associated with bearish options against SpaceX remain prohibitively high, despite his skepticism regarding its nearly $3 trillion market valuation.
According to Burry, the pricing for put options—financial instruments used to bet against a stock—were particularly steep. For instance, a put option with a $100 strike price set to expire in December 2028 was valued at roughly $25, while shorter-term options were also deemed too expensive. Burry noted, “With any luck SPCX will settle in the mid $200s and vol will drain out of the put option chain,” indicating a cautious outlook regarding its volatility.
Burry’s discussion included a critical examination of SpaceX’s valuation, describing it as "fundamentally a small space company" that generates under $20 billion in annual revenue. He pointed out that SpaceX’s market capitalization now surpasses that of established companies like Berkshire Hathaway, suggesting that the market may be overvaluing SpaceX’s diverse ventures in launch services, satellite internet, and social media.
This commentary comes alongside a larger discourse about the potential overvaluation of technology stocks, as Burry previously warned investors about the dangers of current market trends resembling the dot-com bubble. The intense investment interest surrounding SpaceX follows a recent IPO that significantly increased the company’s valuation and elevated CEO Elon Musk’s status as the world’s first trillionaire.
Why this story matters:
- Highlights investor skepticism towards astronomical valuations in the tech sector.
Key takeaway:
- Michael Burry emphasizes caution regarding SpaceX’s potentially inflated market capitalization amidst high option prices.
Opposing viewpoint:
- Supporters may argue that SpaceX’s innovations justify its valuation, marking its position as a leader in aerospace and technology.
