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마이클 버리가 SBC(주식기반보상)를 비용으로 반영하지 않는 월가 관행을 비판하고, 테슬라·팔란티어·엔비디아의 희석과 자사주매입(수익 대비 현금 유출) 문제를 지적함. 엔비디아는 2018년 이후 순이익 2050억 달러 중 910억 달러를 자사주매입에 썼으나 주식수는 거의 그대로이며, 오너스 이익 기준 약 1140억 달러로 재계산. 진행자는 단일 부정 요소만으로 단기 주가를 판단할 수 없고 종합적 시각이 필요하다고 강조하며, 버리가 과거에 크게 틀린 적이 있어 초보자가 맹신하면 위험하다고 경고함.
다듬은 글
Famous hedge fund manager Michael Bur who was depicted in the big short is back again making some very bold claims about the market specifically the AI space here in what he believes to be a very significant AI bubble. He's presenting some very interesting research that I want to break down for you guys in this video here.
Um but again before we kind of get into some of Dr. Bur statements here. I want to make sure there are a couple of things that are clear to everybody because what I think happens um is again Michael Bur is a very famous uh hedge fund manager here and a lot of people are taking what he says about the market as gospel here.
Now while some of the things that Michael Bur is saying here are very helpful to understanding the kind of overall landscape that we are in in the market here. But you have to understand about markets in general here is that when we are viewing these types of situations, potential bubbles, potential market crashes on the horizon, until these ideas or these uh this research or kind of these thesis start to get widespread consensus, well price and value is not going to reflect those ideas.
The second is that a lot of market participants are going to view the market from a black and white perspective. If they see some negative things about a company, they automatically jump to the conclusion that that is a sell or that is a short. And on the other side too, they see one positive thing about a company and think that it is automatically a buy.
What we have to think about is from a holistic perspective what the overall picture is presenting to us. All stocks or all market environments are not going to be 100% positive information or news and not 100% negative information or news either. Now again we also have to understand that Michael Bur being a very successful investor here can make mistakes and timing the market is very difficult and that is very apparent here.
When we take a look at one of the statements that Michael Bur just made here when he was announcing the closing of his fund here, we see my estimation of value in securities is not now and has not been for some time in sync with markets. So, with all of that being said, let's start getting into some of this information here.
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So, breaking down this information here, why are people starting to get a little worried or why have people been worried about, let's say, uh the AI bubble and some of the different levels of risk in the market here? Well, one, when we take a look at the waitings uh in the S&P 500, we can see that Nvidia, Apple, Microsoft, again, Nvidia's waiting is 7%, Apple 6.84%, 8 4% Amazon 4% Tesla 2.3% the mag 7 companies guys make up a significant percentage of the overall S&P 500 and a lot of individuals and market participants view the S&P 500 as kind of the broad market here.
So if there is going to be a period of time where these companies could witness some significant issues well that is going to have a lot of implications obviously across the board. But let's start getting into uh some of these comments from Michael Bur. Now, we've talked about some of these a lot in the past um really as it relates to one specific company there and that is Palunteer.
But Michael Bur is looking at a lot of this information here um and really applying it to let's say Nvidia, Tesla and a lot of these other companies as well. So while tech companies today are no longer engaged in clearly unethical 2000 era practices such as backdating stock options, there are still catastrophic ways in which value is diverted to enrich management and employees at the expense of shareholders.
Whereas equity compensation was once reserved for board members and top management, the practice has spread throughout companies and even down to new college graduates who often see equity compensation as a significant part of their total pay. the last decade or so, this has resulted in an explosion in stock-based compensation costs that are key here not adequately captured under either generally accepted accounting principles uh expense guidelines or Wall Street's adjusted earnings and estimates.
In fact, Wall Street analysts add back generally accepted accounting principle SBC, stockbased compensation costs, effectively eliminating SBC as an expense in their adjusted earnings and estimates. The companies themselves are no better, often presenting their own adjusted earnings in this manager uh in this manner.
Media obliges and disinformation is spread with bullish intent. If you learn nothing else in this note, remember not to add back SBC. So, what Michael Bur is starting to argue in this piece here is that there is some financial trickery or tom foolery at play here uh that these companies are engaging in to try and overstate their earnings and meet a lot of these growth expectations.
And he goes into a couple of examples here. The first one being Tesla. Tesla dilutes its shareholders at about 3.6% per year with no buybacks. Buybacks are going to be very key as we get a little bit deeper uh into the uh analysis of this research here. With the recent news of Elon Musk's $1 trillion pay package, dilution is certain to continue.
Tesla's market capitalization is ridiculously overvalued today and has been for a good long time. As an aside, the Elon Colt was all in on electric cars until competition showed up, then all in on autonomous driving until competition showed up, and now is all in on robots again until competition shows up.
Another beauty is Palanteer, which has been diluting shareholders at an annual 4% rate despite buybacks. Palanteer, according to Michael Bur, has no earnings after adjusted stock-based compensation. Palanteer has the distinction of being the first billionaire torevenue ratio greater than one that I have ever seen.
Meaning for the amount of billionaires that it is uh actually created here versus the revenue uh that number is greater than one. Five billionaires due to stock ownership with less than 4 billion in annual revenue. Now, one of the interesting things about Palunteer, as a quick aside here, is that again, one of the main reasons uh back in the day that Palunteer was not getting the love that it did deserve, again, when I was outlining this one for you guys at the $15 area, uh one of the reasons why Wall Street did not like this company here, was again the heavy amount of concentration in government contracts and also the really high levels of stock-based compensation.
And again, we saw stockbased compensation levels starting to move to the downside, but over the last year in 2024, we have now started to see stockbased compensation moving back up. Now, for those of you guys that might be confused at this point as to why this could become a significant issue and why it was sort of an issue for Palunteer here specifically back in the day is that when these levels of stockbased compensation are really high, again, it is increasing the total amount of shares outstanding.
And when you think about a lot of the common metrics that are going to be used to either evaluate a company or really decide whether people think that this is an uh company that they want to invest in or not, well, that is definitely going to influence earnings per share. If there are more shares, the EPS numbers are going to move to the downside.
That is the issue that Michael Bur is starting to hint at here. Now, again, this is where these buybacks start to come into play. Of course, in practice, many businesses opt to repurchase stock to offset at a minimum the dilution of their SBC programs. In this case, owners are not technically diluted.
Rather, the capital spent on buybacks becomes a mandatory drain on cash flow that is typically far in excess of reported generally accounted uh generally accepted accounting principles SBC expense. The cash drain has a negative effect on intrinsic value akin to dilution. So, here's the key part here.
If the Wall Street analysts are not adding back stock-based compensation here, well, the cash drain that these buybacks that Michael Bur is saying are mandatory uh are going to drain uh these cash levels from these companies and then are also going to be reflected in their earnings and he is saying that this needs to be accounted for.
Such buybacks represent a true cost that penalizes both present value and potential long-term returns. Many of our popular companies such as Nvidia are engaged in what he calls buybacks to nowhere where the cash spent on purchases does not reduce share count. Now going and taking a look at an actual real world example of this on Nvidia, Michael Bur goes on and says I see that back at the beginning of 2018 shares outstanding were about 24.3 billion and today I see the number surprise 24.3 billion actually 47 million shares more but I round down.
This buyback to nowhere is common among technology companies. Therefore, Nvidia spent 91 billion of its 205 billion in net income without changing the share count. I must factor this into owner's earnings as it is a significant transfer of wealth from shareholders to employees here. So, we can actually take a look at a chart of this right here.
Nvidia owner's earnings 2018 to present. We're seeing that reported cumulative net income here of 205 billion. But when you account for these buybacks here, again, that 91 billion, again, you have $135 billion of owner's earnings, when you also account for adding back the stock-based compensation expense.
Now, Michael Bur also goes even further and is accounting for more of these expenses. The cost to the company of stockbased compensation is also the whole quote paycheck. The cost of the grant of stock on a net basis plus the cost of the withholding tax payments the company makes. In Nvidia's case, because the 2018 present grants of stock were almost entirely offset by $91 billion in buybacks, we can easily calculate 91 billion is one part of the cost of those grants of stock.
When this equivalence does not exist, the calculation is just a few more steps which we will address at another time. For Nvidia, those 2018 to present withholding tax payments related to vested RSUs amount to 20.5 billion. So there's an additional 20.5 billion here that need or uh 21 effectively billion here that needs to get taken out and you end up at around 114 billion.
So now, if you're a little confused at this point in the video here on exactly what this means, well, what Michael Bur is effectively saying is that the way in which these earnings are being represented to shareholders, the market analysts, and the way the media is reporting on this is a massive over representation of what these companies are actually generating on a net basis.
And what Michael Bur is saying is that these types of let's say expenses need to be accounted for when you are trying to analyze a company. Now, Nvidia also wrote to a lot of Wall Street analysts and a lot of large financial institutions who try and get these analysts completely on Nvidia's side here and they were making statements such as, well, everybody is doing this and reporting their earnings in such a way.
And what that shows us is that this isn't necessarily a new issue. So, I think a lot of people could read a lot of this data here and a lot of information and say, "Oh my god, Nvidia is overvalued by at least 100%. This is a company that we should go out and short in the open market." But what you have to realize is that again, these things need to be taken with a grain of salt.
And at the end of the day, the market is going to decide what these companies are worth in the short term, not based on, let's say, one niche example of, let's say, a negative attribute. Because this can definitely be taken as something that is negative across the board here. But like I said in the beginning of the video, not all stocks, not all markets are going to have 100% of the news and information coming out about them being positive.
We have to think from a holistic view and really think okay where are these companies headed in the future? What do the overall macro conditions look like for everything moving forward? And that is how we are uh we should be basing our decisions here. The one thing that I think I I could foresee being a pretty significant problem with this new uh substack that Michael Bur has is that it could be very harmful to let's say newer market participants here because they are going to be view somebody like Michael Bur as let's say an expert who can do no wrong.
Michael Bur, as many of you guys know, has been wildly wrong many, many times in the past. And I don't want people to take that information that he's sharing to the public and start uh going out and making some, let's say, uh uninformed financial decisions here when they are not seeing the big picture.
So guys, that is really going to wrap up this video here. If you have any thoughts, questions, comments of your own, make sure you guys drop them down below. If you guys did enjoy the information and analysis I provided for you guys in this video here, make sure you go down and hit that like button.
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