Jul 14, 2026
Watching a stock fall by half is enough to make anyone want to panic-sell. But Michael Burry, the investor made famous by the film The Big Short, argues that selling is often the wrong move — even after a stock has collapsed in value.
In a June Substack post, Burry wrote that once an investor is deep in the red on a position, the price they originally paid stops mattering. The only number that counts, he said, is the stock’s current price — because that’s the starting point for any future gain or loss.
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For Canadians who hold U.S. stocks — whether directly, through a brokerage account, or inside a TFSA or RRSP — the lesson hits equally hard. Fixating on what you paid for a stock is a universal investing mistake. But the tax rules that shape how Canadians should think about a losing position look nothing like the U.S. system Burry is describing.
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How a stock down 90% still pays off
Burry went through a hypothetical example. Say a stock falls from US$100 (~C$142) to US$10 (~C$14.20), while the underlying business is still worth about US$30 (~C$42.60) a share. A value investor buys in at US$10 (~C$14.20) — only to watch the stock keep falling to US$5 (~C$7.10), a 50% drop from the purchase price.
Almost everyone sells at that point, Burry says — but they don’t have to. Years later, the stock rebounds to US$30 (~C$42.60) a share. Measured from the US$5 (~C$7.10) low, that works out to roughly six times your money over 10 years — about 20% a year. Even measured from the original US$10 (~C$14.20) purchase price, the investment still triples.
Burry pointed to Warner Bros. Discovery (WBD) as a real-world example that matches his scenario almost exactly, though he noted the actual recovery didn’t take a decade — these things rarely do.
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What actually happened to Warner Bros. Discovery?
The US$100 (~C$142), US$5 (~C$7.10) and US$30 (~C$42.60) figures in Burry’s example are rough estimates used to illustrate a point, not WBD’s actual share prices — but the real story followed a similar curve.
WBD wasn’t a stock most of its first owners chose to buy. AT&T spun off WarnerMedia to its shareholders in April 2022 and merged it with Discovery, leaving many retirees and other AT&T shareholders holding WBD shares they never actively chose to own.
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The company launched with a market value of about US$59 billion (~C$83.8 billion), then spent the next two years struggling under heavy debt, falling cable-TV subscriber counts, the loss of NBA broadcast rights and a US$9.1 billion (~C$12.9 billion) admission that its assets were worth far less than previously stated. By the summer of 2024, the stock had fallen below US$7 (~C$9.94) and the company’s total market value had shrunk to about US$17 billion (~C$24.1 billion).
Then it turned around. WBD more than quadrupled from that low point, peaking near US$30 (~C$42.60) and trading around US$27 (~C$38.34) as of July 13, 2026. It isn’t identical to Burry’s sixfold example — but the underlying idea is the same: A stock can keep falling well past the point where it looks cheap, and an investor who holds through the drop can still catch a large rebound.
Patience wasn't the whole story, though — a bidding war helped too. Paramount Skydance outbid Netflix for WBD, and on February 27, 2026, the two companies signed a definitive agreement at US$31 (~C$44) a share in cash, valuing WBD at about US$110.9 billion (~C$157.5 billion) including debt. WBD shareholders approved the deal in April 2026. The U.S. Department of Justice cleared the deal on June 12, 2026, though it still faces potential challenges from California’s attorney general and a pending EU antitrust decision expected by July 22.
Why the Canadian tax math is different
In the United States, how long you hold a stock affects how much tax you pay on any profit you make — investments held longer than a year are taxed at a lower rate. That distinction doesn’t exist in Canada.
Canadian investors include 50% of any capital gain in their taxable income under the current capital gains inclusion rate, taxed at their marginal rate, regardless of how long they held the investment. A proposal in the 2024 federal budget would have raised that inclusion rate to two-thirds on gains above $250,000. The federal government deferred, then cancelled the motion entirely in March 2025. As of the 2026 tax year, the inclusion rate remains 50%.
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That’s a meaningful difference from the scenario Burry describes. A U.S. investor sitting on a loss might have a tax reason to hold past the one-year mark once a position starts recovering. A Canadian investor doesn’t have that clock ticking — the decision to hold or sell a recovering stock like WBD should come down to whether the business is still worth owning, not on a tax deadline.
Holding U.S. stocks in a TFSA or RRSP
Where Canadians do need to pay attention is the account they choose for their holdings. Under the Canada-U.S. tax treaty, U.S. dividends paid into your registered retirement account — a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Locked-In Retirement Account (LIRA) — are exempt from U.S. withholding tax. The same dividends paid into your TFSA, First-Home Savings Account (FHSA) or non-registered account are hit with a 15% U.S. withholding tax — and inside a TFSA, you can’t reclaim that tax.
WBD doesn’t currently pay a dividend, so the withholding-tax question doesn’t apply to the stock in Burry’s example. But the broader context holds for any Canadian building a U.S. stock position: Growth stocks that pay little or no dividend can sit comfortably in a TFSA, while U.S. dividend-paying stocks are generally better placed inside an RRSP.
What this means if you’re sitting on a loss
The idea Burry is describing is often called anchoring — the tendency to fixate on what you paid for an investment and wait to sell “once you’re back to even.” The market doesn’t know or care what you paid: Your return from today is measured from today’s price.
That reasoning only holds if the company behind the falling stock is actually worth more than the market is pricing it at. In Burry’s example, and in WBD’s real story, the stock kept getting cheaper while the company still had real assets and cash flow behind it. But plenty of stocks that fall 90% are cheap for a reason — and never recover. Some keep sliding all the way to zero. The real skill isn’t holding every losing stock and hoping for the best. It’s knowing the difference between a stock the market has undervalued and a business that’s actually falling apart.
It’s also worth noting what Burry isn’t doing here. His investment firm, Scion Asset Management, closed in November 2025 so he could focus on his paid Substack. This isn’t a stock tip — it’s a way of thinking about what to do when you’re already deep in the red on a position.
Next steps for Canadian investors sitting on a loss
- Stop fixating on what you paid. Your next decision should be based on the stock’s current price and the business’s current value, not what you originally paid.
- Know the difference between “cheap” and “broken”. Ask yourself whether the business still has real earning power, or whether the falling price reflects a permanent problem with the company itself.
- Match the account to the stock. Hold U.S. dividend-paying stocks in an RRSP, where the Canada-U.S. tax treaty eliminates U.S. withholding tax, and save your TFSA for growth stocks and Canadian holdings.
- Use capital losses to your advantage. If you sell at a loss in a non-registered account, that loss can be used to offset capital gains elsewhere in your portfolio — or be carried back three years or forward indefinitely under CRA rules.
- Don’t let a short-term bounce fool you. A stock’s recovery from a low doesn’t automatically mean the business has fixed its problems. The takeover bids that helped WBD bounce back won’t happen for every falling stock.
— with files from Melanie Huddart
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Godwin Oluponmile is a content specialist, SEO strategist and copywriter with seven years of expertise in finance, Web 3.0, B2B SaaS and technology. His work has been featured in publications such as Entrepreneur, HackerNoon, Blocktelegraph and Benzinga.
