Michael Burry, the investor famous for shorting the housing market before the 2008 financial crisis, says SpaceX's valuation has grown so outsized that he's tempted to bet against it. He stops short of making that trade, however, citing the astronomical cost of options contracts needed to establish a short position.
Burry's hesitation reveals a real constraint facing contrarian investors. SpaceX's private market valuation has climbed past $180 billion in recent funding rounds, placing it among the most valuable private companies globally. To short a private company, investors typically use options, which lock in the right to sell shares at a set price. Those options have become prohibitively expensive as SpaceX's valuation soars.
The math works against skeptics. If you want to profit from a stock decline, you either short shares directly (borrowing and selling them) or buy put options (the right to sell at a fixed price). With SpaceX remaining private, buying puts is the main avenue. Yet those contracts command steep premiums when the underlying asset commands such a high valuation. Burry suggests the cost of entry simply doesn't justify the potential payoff.
This dynamic highlights a broader investing reality. Companies trading at extreme valuations often price in extraordinary growth expectations. Betting against them requires either deep conviction or a price advantage. Burry has shown he'll walk away from trades that don't meet his risk-reward threshold, even when the setup tempts him philosophically.
SpaceX's valuation rests on real operational achievements, including regular Starship tests and Falcon 9 launches that generate revenue. That separates the company from purely speculative ventures. Still, Burry's commentary underscores how valuations in private markets can drift disconnected from near-term economics.
For retail investors, the lesson cuts both ways. You cannot short Sp