Tesla shorts have been losing money — a lot of money — and on the surface, it’s because they’ve been betting on the failure of a company that is not only succeeding but changing every industry that it touches. They see this as madness, but the roots of their problem appear to be a basic error in the game “one of these things is not like the other.”
The reason they are losing is that they are placing their money in the trust of hedge fund managers who think they are fighting an enemy they know, when in fact they are fighting blindly.
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
In a tweet by a popular short seller, he says that Tesla is simply an auto OEM, and is not an efficient one. The truth is that he doesn’t understand Tesla. He thinks he does, but he sees the company as if it were Enron and has bet on it being exactly like Enron.
— Diogenes (@WallStCynic) December 22, 2019
At first glance, from the table above, one would be led to believe that the Tesla Model 3 Performance and the Tesla Model 3 SR+ were behind Hyundai in some important way. In actuality, the figure the chart is sorted by is just one part of an equation — at the end of the day, what matters is the whole package the driver has at his or her fingertips and toes.
The Tesla critic notes that the Tesla Model 3 isn’t #1 in a few specific metrics, but he misses the point that the Model 3 is by far the best overall package, which is why it is far and away the best selling electric car in the world in 2019, and the best selling car of any kind in certain markets. Cherry picking data to come up with a table where a Tesla isn’t even in the top five among electric vehicles, it’s hard for anyone to take this seriously as an honest attempt to understand the story.
This is what the short sellers do, though. They take information and distort it to make it look bad for Tesla. But they are losing money by living in a distorted reality. The have lost billions of dollars in recent days, while also deceiving their clients if they are managing other people’s wealth. In October of 2019, Tesla short sellers lost more than $1.4 billion in a single day. The losses have grown tremendously since then. This shows just how out of touch some (or most) stock analysts truly are when it comes to Tesla.
First, it seems they don’t “know their enemy.” They think Tesla is just an auto OEM, but it’s not just that. Tesla is a game-changer for several industries and is charging down the path toward sustainable energy with products that center around that particular lifestyle. These products make that lifestyle popular. The more people realize that they can save money by not having to buy gas, the more they will buy a Tesla. They can buy solar from Tesla to cut their long-term charging costs. If they get Full Self Driving, they may one day make money letting their cars act as robotaxis, and their vehicles may suddenly jump in value to a figure above their purchase price. Many are skeptical of this, but Tesla CEO Elon Musk has made the forecast a few times. Who has a better track record of being right in the mid to long term?
I think the main reason those who short Tesla are losing money is because they are fighting against what they believe is a fraudulent company. This breaks the “know thy enemy rule” and shows that they don’t know Tesla. Tesla is not Enron, not even close, yet certain critics and short sellers make the comparison month after month and year after year. Some people buy the story, and then they lose money when they’re on the wrong side of the trade in the future. Today is apparently another bad day for people betting against Elon.