Tesla short-seller extraordinaire Jim Chanos of Kynikos Associates — who hasn’t been served well by his positions on the company in the past several years — has continued to add to his short position on Tesla in recent days, he revealed at the recent Reuters Global Investment 2018 Outlook Summit.
Notably, the comments from Chanos included the prediction that Tesla CEO Elon Musk would step down by 2020 in order to focus on SpaceX as major auto manufacturers got more serious about electric vehicles — which, according to Chanos, will lead to a mass flight away from the stock since people are actually investing in Musk not in Tesla, according to the arguments.
“Obviously this is not being valued as a car company, it’s being valued on Musk … he’s the reason people own the stock,” Chanos commented.
“Put it this way,” Chanos continued. “If you wouldn’t be short a multi-billion-dollar loss-making enterprise in a cyclical business, with a leveraged balance sheet, questionable accounting, every executive leaving, run by a CEO with a questionable relationship with the truth, what would you be short? It sort of ticks all the boxes.”
While that makes some logical sense, I have to wonder how much that sort of logic actually relates to the stock market — so much of what determines the ups and downs of the stock market is simply due to herd behavior (and nowadays to trading algorithms). In other words, if the PR buzz remains behind Tesla, why would the stock tank?
As regards the company’s performance, it’s quite clear when one looks at their financials that the company could have been a profitable niche manufacturer many years back. The primary reason for the firm’s “unprofitability” has simply been its very aggressive expansion path taken (as has been the case with Amazon as well).
Reuters provides more: “Shares of Tesla are up 44% for the year to date, at one point pushing the company’s market value higher than competitor General Motors despite Tesla’s not turning a profit.
“On November 1, Tesla reported its largest-ever quarterly loss and pushed back its target for volume production of its new Model 3 sedan by three months. The company said it now expects to build 5,000 Model 3s per week by late in the first quarter of 2018 from its original target date of December.
“Despite the production delays, Tesla has been among the most painful for short-sellers this year, with losses among funds that bet on its decline totaling more than $4 billion this year, according to S3 Partners, a financial analytics firm.”
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