Michael Burry Drops Cryptic Tweet: 'Possible Today We Found Our Enron'

The Big Short fame Michael Burry, who is notorious for putting out market-sensitive cryptic tweets and then deleting them, is at it again.

What Happened: “It’s possible today we found our Enron,” Burry tweeted on Thursday afternoon. His comments came amid the market tumble set in motion by a warning by SVB Financial Group SIVB, the holding company of Silicon Valley Bank.

SVB filed for a $1.75 billion worth of stock sale, comprising $1.25 billion in common stock and $500 million of depository shares, late on Wednesday to bolster its balance sheet. The company said in a statement that it completed the sale of a substantial “available for sale” securities portfolio, valued at $21 billion and that it would result in an after-tax loss of about $1.8 billion in the first quarter of 2023.

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SVB hinted at challenges, stemming from rising interest rates, macroeconomic uncertainty, and high cash burn among its clients, which are mostly tech firms operating in Silicon Valley.

The portfolio comprised most of the U.S. Treasuries, which yielded an average return of 1.79%, far below the current 10-year Treasury yield of 3.9%.

SVB’s stock tumbled 22.2% on Thursday before settling at $82.50.

The development at SVB led experts and analysts to draw a parallel with the collapse of Lehman Brothers and the crisis faced by Chinese property firm Evergrande.

With Burry not spelling out any company’s name, the timing of his tweet suggests his reference could have been to SVB.

Incidentally, the cryptocurrency world was already rocked by a scandal after crypto-friendly bank Silvergate Bank, owned by Silvergate Capital Corp. SI, announced that it was folding up operations.

Why It’s Important: The problems with the lenders have a far deeper impact, as the banking system is the lifeblood of a thriving economy. Banks regulate the flow of capital in an economy through their lending and saving operations.

Burry's reference to Enron implies that the fund manager expects far more trouble in the near term. Houston, Texas-based energy company Enron went bankrupt in late 2002 in the wake of an accounting scandal. From a peak price of $90.75, Enron’s stock tumbled to $0.26 around the time it announced bankruptcy.

Canadian activist investor and Chairman of GameStop Corp. GME Ryan Cohen seemed to draw a positive take on the developments at SVB. “Does this mean I don’t have to pay back Silicon Valley Bank,” he tweeted.

It isn’t clear whether the bank has exposure to Cohen or the companies he is associated with. 

Cohen co-founded Chewy Inc. CHWY in 2011 before selling it to PetSmart in 2017.

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