You would think that Tesla short sellers would be running away after the company’s record quarter announced last month, but it’s not the case for one of the most prominent men betting against the company.
David Einhorn, who is betting against Tesla with his $9 billion hedge fund, is sticking to his short position and says that “it’s as good as it gets” for Tesla.
Einhorn, who became famous for shorting Lehman Brothers in 2007 before they went bankrupt, has been holding a short position in Tesla (TSLA) for over a year now.
Over that year, the fund has been struggling and he partly attributed it to his short position on Tesla.
He even got pressure from investors about his insistence on remaining short on Tesla’s stock and we can only imagine that the pressure has ramped up since the company reported record earnings two weeks ago.
Tesla’s stock has surged 16% since the earnings, but Einhorn is not impressed.
Einhorn said during an analyst call for his company (via Bloomberg):
“We believe this will be as good as it gets for the company. We believe they’ve exhausted most of the demand from customers who can afford the highest-priced versions of the Model 3. Tesla is contending with a litany of competitive, regulatory, human-resources, vehicle-quality and capital-structure issues.”
The hedge fund manager believes that Tesla is now peaking following the earnings and he maintains his short position on the company.
Einhorn, who used to be a Tesla Model S leaseholder, announced earlier this year that he returned the car after his lease ended.
He said he was getting the Jaguar I-Pace instead.
If you are betting against Tesla today, you either have balls made of steel or a brain made of jello.
There are still some obstacles that could give some hard times for Tesla, but I think the worst is behind them.
Betting that they can’t handle those few obstacles after they overcame some much harder ones seems crazy to me.
That said, Einhorn has a point. The demand for the Model 3 Performance clearly dropped, otherwise Tesla wouldn’t have slashed the price by $5,000.
But it dropped from artificially high demand created through a 2-year long waitlist. It doesn’t mean that the demand is down to zero.
Tesla used that artificially high demand to get a higher gross margin on the Model 3 Performance during the third quarter, which certainly helped the company’s results.
Elon Musk offered to reimburse the difference to those who bought the car during the third quarter.
Even though I was disappointed by Tesla’s pricing strategy, which took advantage of that waitlist, the car is as good as it gets. It will keep generating demand going forward – just with a slightly smaller gross margin, but Tesla will still make a lot of money on these cars.
I think Einhorn is grossly mistaken if he thinks that lower Model 3 Performance demand means that Tesla is peaking. Good luck Dave.