Famous ‘Big Short’ investor Michael Burry has issued a stark warning regarding the structural integrity of Chinese technology stocks, cautioning that most investors do not actually own the companies they believe they are betting on.



<h2>The ‘Cayman Shell’ Vulnerability</h2>



In a series of recent posts on X and his Substack, Burry—who famously predicted the 2008 housing market crash—detailed a critical legal flaw in the Hong Kong market.



He noted that for nearly all major Chinese firms, excluding outliers like BYD or Haidilao International Holding Ltd. (OTC:HDALF), the securities held by international investors are merely shares in offshore entities.



“First, we must take a considerable detour and fully examine a vulnerability that applies to almost all these stocks,” Burry wrote. He clarified that “the actual shares bought by investors are shares of a Cayman Islands shell company with no operations.”



According to Burry, this structural link creates a disconnect between a company's operational success and the investor’s legal claim to its value.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div>
<blockquote>Hong Kong Stocks: Structure &amp; Strategy In the last 10 years, Netflix, Broadcom, and Tencent all increased revenue between 4.5-5X. Broadcom and Netflix have been leading performers, but Tencent's stock has almost exactly a 0% return over the last five years. This is the problem.… pic.twitter.com/rXaHHcmUEw— Cassandra Unchained (@michaeljburry) February 26, 2026</blockquote>
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<h2>Growth Without Returns</h2>



Burry highlighted a troubling divergence between corporate revenue and stock performance.



He pointed out that while giants like Netflix Inc. (NASDAQ:NFLX) and Broadcom Inc. (NASDAQ:AVGO) have seen their stocks soar alongside revenue, Chinese tech leader Tencent Holdings ADR (OTC:TCEHY) has delivered “almost exactly a 0% return over the last five years,” despite revenue increasing nearly fivefold.



This stagnation occurs even as the Hang Seng Index sits roughly 15% lower than its 2007 levels, noted Burry.



He suggests that the “easy credit environment” and the potential for radical government intervention “undercut the economy” and deter foreign direct investment, regardless of the “human nature” and drive of the Chinese workforce.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div>
<blockquote>This is an excerpt from my Asia Fund letter to investors in 2005. The emergence of Tencent, Alibaba, Meituan, and other giant companies with global ambitions was obvious back then, even if they were not yet apparent. pic.twitter.com/528YhjFla2— Cassandra Unchained (@michaeljburry) February 26, 2026</blockquote>
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A Long-Term Perspective



Reflecting on his 2005 Asia Fund letter, Burry acknowledged that while he correctly identified the emergence of “global ambitions” in companies like Alibaba Group Holding Ltd. ADR (NYSE:BABA) and Tencent decades ago, the current “numbers game” has shifted.



He warned that traditional measures often fail to capture the impact of a paradigm shift until the “impact is imminent,” suggesting that the current valuation of these “shell companies” deserves a “deep look into vulnerabilities, virtues, and value.”



Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.



Photo courtesy: Shutterstock

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Michael Burry warns of vulnerabilities in Chinese tech stocks, highlighting that many investors do not own the companies they believe they are investing in. He points out that shares are often in offshore entities, creating a disconnect between operational success and legal claims. Burry notes that while companies like Tencent have seen revenue growth, their stock performance has stagnated, with almost 0% returns over five years. He emphasizes the need for a deeper examination of these 'Cayman Shell' companies and their structural flaws.

- Michael Burry has warned about the structural issues within Chinese technology stocks, highlighting that investors often hold shares in offshore entities rather than the companies themselves.  
- He points out a concerning disconnect between the operational success of firms like Tencent and their stock performance, with Tencent showing nearly 0% return despite significant revenue growth.  
- Burry suggests that the current situation warrants a closer examination of these investments, emphasizing that traditional valuation methods may overlook critical shifts in the market.

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iShares China Large Cap

Tencent

Tencent Holdings Limited

CSOP HS TECH

FL2 CSOP HSI

iShares MSCI China

FI2 CSOP HSI

Krne Csi China Internet

FI CSOP HSI

TENCENT

Direxion FTSE China Bull 3X

Michael Burry Exposes 'Vulnerability' In Chinese Tech, Warns Of Hong Kong's 'Cayman Islands Shell' Trap