Elon Musk sent a public letter to David Einhorn, a famous hedge fund manager who has a big short position on Tesla, and he offered to meet him and have him visit Tesla — a smart move that Einhorn would have a tough time refusing.
Einhorn became famous after shorting Lehman Brothers in 2007 before they went bankrupt, and now he is going after Tesla, which he has described as a fraud.
He has been holding a short position in Tesla (TSLA) since 2017, and it hasn’t been going well for him.
The investor has often reported losses on his bet against Tesla, and he did it again this quarter in his new investor letter. That was even before Tesla reported a great quarter and saw its stock price soar for it.
Tesla CEO Elon Musk hasn’t shied away from taunting the shorts before, and Einhorn personally at times.
Last year, Musk sent Einhorn a box full of shorts:
— David Einhorn (@davidein) August 10, 2018
In his latest investor letter, Einhorn wrote that “Elon Musk knowingly orchestrated a significant fraud” when he arranged Tesla’s SolarCity acquisition.
That’s a narrative that many Tesla shorts have been pushing in attempts to attack the company.
Musk responded in a public letter posted on Twitter to invite Einhorn to visit him at Tesla, albeit with some snark:
Dear Mr. Unicorn (fabulous name btw).
We read your Greenlight Capital Q3’19 Investor Letter, in which you make numerous false allegations against Tesla. It is understandable that you wish to save face with your investors given the losses you suffered from Tesla’s successful third quarter, especially since you’ve had several down years in performance and a sharp drop in assets under management from $15 billion to $5 billion. You have our sympathies.
We also recognize your desire to feel somehow relevant with your Tesla short position at a time when your friends in the Tesla short community have been noticeably recoiling from the public discourse, as the world is increasingly recognizing Tesla’s contributions to science, safety, and a sustainable environment.
To the extent that you have any desire to learn about the amazing progress the people of Tesla are making, I would like to extend an open invitation to meet with me to discuss Tesla and tour our facilities. For their sake, I’m certain your investors would appreciate you getting smart on Tesla.
Finally, please allow us to send you a small gift of short shorts to help you through this difficult time.
Regards, Treelon Musk
This is a really smart move from Elon for a few reasons.
If the end goal was just to mock Einhorn, OK, that’s not great, but if the offer is genuine, and Elon really wants to convince him to cover his short position, then it’s extremely smart.
Putting the snark aside, I think the latter is really the goal, but Elon can’t stop himself when it comes to getting back to the shorts.
To be fair, they have been quite awful to him.
I think Elon would have a real shot at changing Einhorn’s mind on Tesla.
It seems unlikely based on his comments about the company, but he is a rational guy. He has just been fed the short thesis in an apparently efficient way before seeing the rational bull side.
Then, he got consistently attacked by TSLA bulls and Tesla superfans, which only helped to reinforce his initial flawed position on the company.
Einhorn seems to have quite a large short position on Tesla, but his position alone being covered wouldn’t have that big of an impact. However, if he changes his mind on Tesla, the fact that he is one of the most respected Tesla shorts and not just a crazy anonymous Tesla short on Twitter would likely have a great impact on the rest of the TSLA short community.
Interestingly, the hedge fund manager might almost be obligated to accept Elon’s offer.
He has a responsibility to his investors to make his decision with their money based on the best information available to him, and refusing to meet the CEO and visit the company he is betting against would go against that.
Come on, David. Go into it with an open mind. What’s the worst that can happen?
Full disclosure: I am long TSLA and loving it.
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