Investor's Corner

Tesla skeptic Burry extends short to ARK Invest fund

(Credit: Tesla)

Long-time Tesla skeptic Michael Burry, who is known as “The Big Short,” has extended his short position to Cathie Wood’s ARK Invest Innovation ETF. The fund holds over $112 billion in investments, with Tesla stock making up 10.43% of the fund.

Burry is a longtime investor who previously predicted the 2007 housing crisis collapse. Burry placed bets of over $5 billion on the real estate market in 2007, resulting in billions of dollars of gains after the housing market eventually collapsed.

Since his legendary short position over 12 years ago, Burry has been recently notable for his short positions against Tesla, the electric car company run by CEO Elon Musk. In January, Burry stated that Tesla stock would eventually crumble, stating that Tesla investors should “enjoy it while it lasts.”

Burry then placed a massive 800,000 put option contracts in Q1 against Tesla stock worth $534.4 million. Puts provide investors with gains when underlying securities drop in price. On Monday, Burry’s Scion Asset Management firm placed more puts on Tesla, bringing the total up to 1.1 million. The puts are valued at around $731 million.

Now, Burry is moving his short position to a longtime Tesla bull in ARK Invest, the firm that has remained heavily supportive of Tesla and Elon Musk’s other ventures, including Neuralink. Known for accurate predictions of Tesla’s stock, Wood and ARK gained notoriety several years ago when they predicted that its stock would surge to $800 in 2018. This was impressive as, at the time, Tesla was battling profitability issues and ramping the Model 3, a process that nearly took Tesla bankrupt.

Wood was ultimately proven right last year during Tesla’s monumental 2020 stock surge, which sent the automaker’s stock up over 700% in a year that was extremely tough for many companies. However, after reaching the $800 split-adjusted price that Wood predicted, ARK’s investment narration became more mainstream. Tesla supporters have listened to Wood’s investment strategies due to the outlining success that the firm predicted.

However, Burry is not one of those listeners. After comparing ARK to the Manhattan Fund, he said, “If you know your history, there is a pattern here that can help you. If you don’t you’re doomed to repeat it.” The tweets are now deleted. Burry placed 235,500 put options against ARK’s Innovation ETF fund, which was a top-performing ETC in 2020 after gaining 149% in value.

At the time of writing, Tesla shares were down 3.66%.

Disclosure: Joey Klender is a TSLA Shareholder.

Tesla skeptic Burry extends short to ARK Invest fund
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