Tesla short sellers reportedly lost nearly $2 billion at the end of last week. Yes, two billion. If you thought all of the anti-Tesla FUD and media hype was coming from the most honest of places, think again. People don’t like to lose money. They normally like to make money. When they have billions on the line, they also do their best to drive the narrative.
Granted, the nearly $2 billion was in “paper losses” and it seems the Tesla [TSLA] short position hasn’t changed much. So, rather than getting out as the stock price rose from about $300/share to $350/share, they more or less stuck to their positions and supposedly expect Tesla to come crashing down sometime in the coming weeks or months.
A prominent short, Mark Spiegel, is seen in the above video debate defending his fund’s short position even after the last Tesla shareholder letter, conference call, and stock rally. HyperCharge TV’s Galileo Russell — who was on the Tesla conference call last week just after Tim Higgins of the Wall Street Journal and I asked a few questions, and was also on the previous conference call — provides the counterpoint.
Tesla CEO Elon Musk has said multiple times that Tesla is almost certainly going to show a profit in Q3 and Q4. On the conference call, he added that cash and cash equivalents on hand totaled $2.2 billion, more than the market expected. He added that Tesla should show a profit more or less indefinitely after that. Tesla Model 3 production has been steadily improving and there’s vast demand for the car, as well as Tesla’s other vehicles and energy products. All of those signs were good enough for investors to pour well over a billion dollars into the stock. This was supposed to be Tesla’s last quarter with a declining balance sheet and Tesla seemed to safely skirt through it, so the market responded but shorts held their positions nonetheless.
Aside from simply not believing Elon Musk, Tesla CFO Deepak Ahuja, and thus Tesla’s public statements overall, some TSLA bears seem to think that large automakers are about to come in and crush Tesla’s consumer demand. That claim seems too fanciful to be genuine, in my humble opinion, since 1) Tesla has demonstrated that there’s a staggering amount of demand for its vehicles, 2) its consumer base grows many times a day as more people see and experience Tesla’s cars and go into a store or online to order one, 3) other automakers don’t have certain competitive advantages that Tesla has (like Supercharging, Autopilot, and the top-of-market performance specs), and 4) other automakers aren’t even prepared to produce a similar number of electric cars.
Of course, there is a chance that many Tesla critics are part of a large smear campaign to try to slow or completely stifle Tesla’s growth, but I think it’s clear that some of them simply believe that Tesla can’t make money (why they think that, I can’t figure out). Some of them also think Elon fraudulently lies to the world (a belief I have an even harder time figuring out). And I guess it’s possible that some honestly believe the big bad automakers are coming to take Tesla’s customers and lunch money (which is perhaps even the most absurd part of the overall short thesis).
I don’t wish any harm on people simply for making mistakes, and I try to wish no harm on anyone at all, but I do find that shorting healthy, helpful, mission-driven companies is not a service to society that warrants positive returns to the short seller’s bank account. So, I shall not cry a tear in the coming months if that $1.7 billion loss multiplies. Indeed, I’ll be happy to accept my tiny portion of the cash.
Want to play with Tesla’s numbers yourself? Check out Vijay & Maarten’s SimTesla game.
Charts used above are from “7 Charts — Tesla Model 3 vs The Competition (US Sales).”
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