Betting Against Tesla: Skeptics Make Their Case

Here in Southern California, one cannot be on the road five minutes without seeing multiple Teslas and I have yet to meet an owner who doesn’t gush over them. Musk could sell cars only to Californians for the rest of his natural life and not go out of business.

Here's the latest, "Consumer's Rule of Thumb": Don't! don't buy, really big-tag [read, 'expensive'] items from companies run exclusively by venture capitalists. -- Venture capitalists ['VCs'] usually tend to be rather amoral, when it comes to handling *your* money, and not theirs. After all, it costs them nothing, aside from their reputations, to invest it in order to promote, that next, “really big thing(!)" Most if not all of them are in my opinion, hard-wired to do this--probably from birth. And like my "Uncle Who’s-Its," who just can't lay off the booze, most VCs just keep on going, from one big-thing to another. And they rarely learn from experience. — So my advice to consumers everywhere is, “don't *ever* risk your financial well being, by helping to inflate the latest bloated ego to arrive on the scene.” — No doubt about it, electric cars are here to stay, but only as a product of careful, sustained [think, “time-consuming(!)”] development on all fronts—financial, manufacturing, distribution and above all, consumer relations. I doubt very much if Elon Musk, or any other venture capitalist has what it takes, to accomplish all this on his own.

"This isn’t only about Musk,” said Mark B. Spiegel, a managing partner at Stanphyl Capital, which has a large position shorting Tesla. " This is why Musk is angry. He wants everyone to buy into his superhero bigger-than0-life image that his fans do. I get that he's smart, but he has his flaws.

The party is over. Luxury electric SUV from Jaguar already here. Porsche, BMW, VW, Volvo, and Benz are on the horizon. All have established dealer networks and loaners. Universal charging system must be established

This is exactly the kind of logic that prevented me from investing much in Amazon. Overvalued? Blah! To compare Tesla's products and performance to GM - that's borderline criminal. Detroit and short sellers have their reasons for destroying Tesla. But the smart foreign makers - BMW, Mercedes, Jaguar and Volvo are trying to do one better than Tesla. There is a message there.

Elon Musk had a financial crisis in 2008. He can get out of another one

Wow, yet another negative Tesla article from the NYT. I find it unbelievable that these articles spew from the Times. I would expect them from Fox News, but not the NYT. These shorts are like all the other "expert" money managers who equate Tesla's cash and capital position with any other business. Notably, my investments which simply follow the market indexes outperform these "experts" all night and day, and for far less investment costs. For the thousandth time, there is a simple reason why there hasn't been a successful car company launched in the last 80 years, given the immense barriers to entry -- capital requirements high on the list of barriers. Again, Tesla is investing big dollars on the factories that will be required for Tesla to sustain production over the long term. Nobody, repeat, nobody should be surprised that Tesla is cast-constrained. Yes, competition is coming, but Tesla has built a huge head start by delivering not just great electric cars, but great cars, supported by a true high-speed recharging network. And that high-speed charging network isn't a plan; it's a reality because Telsa put its money where its mouth is. Even if the bigs can produce truly compelling competition, can manage to actually deliver a nationwide (and worldwide) charging network, electric car sales are but 1% of total vehicle sales. In other words, there is plenty of room for other competitors, none of whom can really kill Tesla. Please, NYT, enough of the FUD.

I believe Elon Musk is a once-in-a-generation innovator, inventor, and engineer. However, he's not so good at running a consumer product company which makes a big-ticket durable good. He seems to be far-flung in many and surprising ways. When Henry Ford was amassing his factory works in Michigan, would he have followed the Wright brothers into aviation? Then why is Musk going into rocketry and space exploration while Tesla is not turning a profit? His eye is not on the main chance. In addition, with his other interests Musk ignores the opportunity cost of marketing storage batteries to home owners, making many Americans net producers of electric power. If he were to turn Tesla's technology to that, integrating power generation and needs of the auto and home, he'd go down in history as a hero. Musk's talk of taking the the company private was wildly imprudent and probably illegal. You'd think he would be so busy trying to fix things that he would have not have the time to make public comment. Legality aside, why oh why would a high profile executive broadcast himself smoking dope? That's nutty, not necessary, and ads fuel to the short sellers' fire. If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

Amazing number of Tesla defenders (many owners) commenting here. Sure Tesla make some good extremely expensive cars, but the company is built more on hype than anything else. Just think what GM or other auto manufactures could do with all the cash investors have poured in to Tesla and if it could make $90,000 cars without having to worry about making a profit. I'll bet that they could have designed and produced some pretty nice cars as well. But other companies have to make a profit and sell cars that enough people can afford to buy. So Tesla gets a lot of benefit from its hype. Perhaps the hype can be continued long enough and in the long run the hype will pay off and Tesla will figure out how to be a profitable company. But Musk seems to be undermining this possibility. I guess there are different paths to success, but this is a risky one.

I think I'm a not-unusual Tesla shareholder. I knew when I bought my shares that I wouldn't be looking at a profitable company for years, if ever. But I own a little piece of the one entity I can see that is actually thinking about and responding to the future. We know very well that old / toxic tech has ardent defenders, and that one of their favorite defenses is eliminating options to their products. It would not surprise me to know that they wish Tesla would just disappear. I also think I'm probably not unusual among Tesla shareholders in regarding the stock price as kind of irrelevant. This is no stock for institutional investors whose primary interest is short-term returns. Musk's retracted attempt to take the company private made perfect sense to me.

As the owner of both a model S and a model X, I am "rooting" for Tesla's success. We routinely drive our cars to Florida and to the west coast, never paying for fuel. Yes, Tesla is burning through cash, but we have noticed a great surge in the number of Superchargers across the USA (as well as in Europe and China). The cost of the supercharger infrastructure is huge, and I don't see any superchargers popping up for any other manufacturer, so the other manufacturers will be playing "catch-up" for many years. I don't know what portion of the cash "burn through" is due to the Supercharger build out, but it is clear that this investment by Tesla does not instantaneously bring in cash. The Chevy bolt, while having very nice range, just cannot reasonably be used for long distance driving without having a supercharging infrastructure or the ability of the car itself to accept a fast charge. In this, the Tesla is head and shoulders ahead of any other electric car. When pulling into the Supercharger station, you join a group of "happy campers."

I have owned a Model S since December 2015. Tesla makes excellent cars and they have an infrastructure of Superchargers across the Country. If the Company goes under, someone with the capital resources will buy them. Tesla cars will not disappear.

I do not understand how short-selling is even legal. Hedge funds betting big money (and spreading misinformation) with the aim that the value of a company (that employees thousands of people and makes a revolutionary product) will tumble and fail. It isn’t right. Those short-sellers instead should try a Tesla. It is like driving a space ship sent back from the future. I, for one, just ordered a Model X.

Articles on Tesla's financials never seem to go into any detail. Incompetence or laziness? Not sure. But here's a key conceptual detail about Tesla's financials: They are spending a lot of money (aka burning cash) on future products and assets that aren't generating revenue today. Like any hardware startup, albeit on a much longer timeframe due to the nature of the industry. Some examples of what Tesla is "burning" cash on: 1. Construction and expansion of largest battery plant in world for vehicle and energy products 2. Development of more "affordable" SUV (Model Y) 3. Development of long range semi-truck 4. Development of fastest production car (next-gen Roadster) 5. Development of large pickup truck 6. Software development of autonomous driving Going forward, these will all be revenue and profit-generating assets, aka they will make more money than they spent on them. You are just seeing the spending part right now. That's not to say Tesla isn't wasting money on ineffiencies, but the conversation really has to parse out these different concepts. This future asset development is a primary driver in the valuation of Tesla. They are in a state that no other car company is at. They have a wide open road. The international and domestic demand is seemingly there (I mean, 400000 deposits, are you kidding?) Grow baby grow. Burn that cash now. If you build it, they will come.

I have been a climate strategy consultant for more than 10 years. I own some shares in Tesla but I don't really care about the profit I might get from them, what matters to me is that we have an alternative to the use of oil, gas and coal in electricity production, storage and transportation asap and that future generations can enjoy a livable planet. In almost 3 years my shares went from -30% to +95% and I never considered selling them for a profit or to mitigate my losses because I don't see alternatives in solar, storage and clean cars that appear more credible / less risky. To me the decisions to buy Tesla equity was similar to giving a few thousands bucks to a charity. I did it because Tesla is the only company of this scale which is 100% committed to a zero carbon future. Maybe the NYT could have spent a bit more time covering the governors, mayors and CEO who were taking pledges in SF last week.Or further investigating the externalities of the old fashioned car industry. Remember the VW scandal and NOx/SOx are a small externality compared to CO2 emissions, the greatest market failure of all according to Lord Nicholas Stern. Soon when millennial with deep pockets (and given the wealth concentration in the US there are a few of them) will start suing oil&gas, coal and automotive industries for not having act on climate I think my shares in Tesla would be worth every penny and companies that contributed to the issue in the first place will see their shares tumble.

I dont care about the stock. What I do know is that everyone I know wants to drive a Tesla. Its a trendy, safe, cutting edge car with great reviews. Even if the company balance sheet is as bad as these experts say, to me, shorting such a product seems a huge gamble.

What is the value of short sellers to the economy and society. They keep forcing CEO’s to think of short term profit and not innovate. They are vultures who need to be regulated

What a hit piece. The short-sellers are getting desperate. They are going to lose their shirts in the end. Tesla has no real competition in a rapidly growing market. The buyers love their cars. What other electric car company makes their own batteries or has their own charging infrastructure. Their only real competition is the Bolt which simply doesn't compare. Musk is a visionary CEO and mentally quite stable despite the media's hysterics. Don't bet against Tesla!

Something has always puzzled me. I can't see anything so unique about Tesla cars that couldn't be replicated by any number of other successful car companies. Say, for instance, that VW Group wanted to make something that approximated the Tesla Model 3. Is it really so hard to picture one or another well-financed manufacturer eventually coming into the market and seducing buyers with the next new thing? Besides, buyers are moving away from sedans in favor of CUVs and SUVs anyway.

Four fair and reasonable points, and certainly open to vigorous debate. Also open to debate is the idea of short-selling. Once a useful tool to straddle and protect profits until they can be claimed in favorable tax conditions, short-selling has become a weapon. If you doubt a company, simply don't invest it. Better yet, invest the money in a healthy competitor. Short-selling raises the "conflict of interest" flag for me.

In an article which could have short or long term negative effect on the market price of Tesla stock, I am surprised that the author did not check the math cited to see the sustainability of shorting logic when countered by the Company itself which didn't reply by print time. Of course other explanations could exist but, if so, I would have thought that Mr. Boudette would have be the impartial advocate and address any possible confusion arising from his article. Ergo: under "Burning Through Cash" the argument is put forward that half of the cash in Tesla's till is restricted since it represents refundable customer deposits, Thus the article is talking about (Mr. Boudette? Mr. Noble?) some $1 billion+ of the $2.2 Billion on hand. Yet when we read further "Questions About Demand" (last section) readers learn from Tesla: "The company has reported that more than 400,000 people have paid deposits of $1,000 each to reserve Model 3s." 400,000 x $1,000 = $400 million but who's going to quibble over a missing $600 million in deposits (op cit) which goes unexplained as though it were burned by the shorts. If there is a plausible explanation, then readers/investors are due the courtesy of an explanation.

People seem to confuse the notion that a company is a terrible company and is going to crash spectacularly with the notion that a company's stock is overvalued. Short sellers don't necessarily think the company is a dog, they just think the numbers don't add up to the current stock valuation. IOW, you can short a stock and still love its product.

This article is fairly reminiscent of what one might expect from Cosmo: "Four reasons not to buy Tesla stock," with superficially parroted arguments put forth by "experts." Nevermind that these people have positioned themselves to benefit financially if Tesla fails. (Incidentally, that's not investing.) Elon Musk is doing things that very few on the planet are capable of. There is no better CEO to bet on today for a true investor with enough of a horizon to deal with nearer-range volatility. The quoted experts, who by the way, have not built a functioning auto manufacturer and could not possibly have developed reusable rockets, may in fact have a much poorer understanding of these things than the person who is actually making them happen. I think I'll keep the portion of my investments that I've placed with Elon just where they are. BTW, is the reporter familiar with the concept that current stock values reflect expected value of future earnings?

Did they also short Amazon when it was losing money for years? How did that work out for them?