{"id":977,"date":"2018-07-01T12:20:16","date_gmt":"2018-07-01T12:20:16","guid":{"rendered":"https:\/\/www.antya.ca\/research\/tesla-inc-shorting-the-shorts-next-stop-500-share-in-3-months\/"},"modified":"2026-02-17T06:27:31","modified_gmt":"2026-02-17T06:27:31","slug":"tesla-inc-shorting-the-shorts-next-stop-500-share-in-3-months","status":"publish","type":"post","link":"https:\/\/www.antya.ca\/research\/tesla-inc-shorting-the-shorts-next-stop-500-share-in-3-months\/","title":{"rendered":"Tesla Inc. \u2014 Shorting the Shorts \u2014 Next Stop $500\/Share in 3 Months"},"content":{"rendered":"
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For bulls like us Tesla Motors Inc.\u2019s (TSLA US) announcement of meeting production goals is good news. Bears need to find a way out of the mess they find themselves in. Tesla has a market capitalisation of only $60 billion or thereabouts. Facebook, Amazon, Apple, Microsoft, Netflix , Alphabet, Alibaba, Tencent are all worth a lot more. Tesla will be a worthy addition to that walk of fame in a couple of years.<\/p>\n<\/div><\/div>\n<\/div>\n

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Tesla Inc. (\u201cTesla\u201d or the \u201cCompany\u201d) has done the impossible. As illustrated in figure 1, Tesla not only achieved its production goal of 5,000 models 3 cars per week; it is likely to exceed it going forward. Based on Musk\u2019s tweet, in the final week of June 2018, Tesla surpassed its production goal and produced 1,000 Model 3 cars per day, for a total of 7,000 vehicles in the week. Tesla also reached another milestone by manufacturing an additional 7,000 Model S and Model X cars in a week.<\/p>\n

Figure 1 outlines the source of that information.<\/h3>\n

\"\"<\/p>\n

Additional details related to Tesla\u2019s achievement are available at the following link from Reuters which broke the story today subsequently picked up by CNBC, The Wall Street Journal, and others. Before we outline our thinking and subsequent events that flow through from this, we provide the links so as the readers can better judge the tone in the media for themselves. If this is a surprise, it should not be because Musk outlined that Elon Musk: Doubters of Model 3 delivery number are in for a \u2018rude awakening\u2019. He said that after splurging $25 million to buy stock in Tesla as reported by electric on June 13, 2018, in the following story: Elon Musk buys another $25 million worth of Tesla
\n(TSLA) stock as he pushes for profit.<\/p>\n

Nonetheless many have been focused on unnecessary distractions such as Tesla\u2019s rogue employee that we provided details on in Tesla\u2019s Rogue Employee -Distraction or Substantive.<\/p>\n

Some investors have been unduly focussed on the fact that Tesla added a production line in a tent, which apparently is not even air-conditioned. Similar sentiments must have been expressed by those Boeing and NASA engineers that spent billions burning up rockets in the atmosphere because the taxpayer was footing the bill. No one believed that Rockets could come back to home base either until SpaceX showed the way.<\/p>\n

An analyst said that:<\/p>\n

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it\u2019s preposterous\u2026! pity any customer taking delivery of one of these cars. The quality will be shocking.\u201d<\/p>\n<\/blockquote>\n

Ah! The problems of the first world! Details are available in Tesla builds giant tent to ramp up Model 3 production; expert calls it \u2018insanity\u2019. Just to provide context, we grew up in a 1,200 square foot home with fans and intermittent power in New Delhi in India, and find no problem either with the quality of our output on Smartkarma or our driving capabilities on the autobahn.<\/p>\n

We are also surprised at the tone of the auto analysts while disparaging Tesla. We have been up, close and personal in St. Thomas Ontario, where Ford Motor Company built Crown Victoria until 2011, and in the Oakville Plant near Toronto, where SUVs are made currently. There is a significant degree of automation, but we didn\u2019t miss air conditioning, because if we recall correctly, there was none.<\/p>\n

In spite of all the air-conditioning at competitors\u2019 plants, if there is any, in the financial statements we still did not find advances from 450,000 customers willing to wait for a year or two to get their cars.<\/p>\n

What will the shorts do now?<\/h3>\n

The shorts banked on the following planted stories in the media:<\/p>\n

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  1. Tesla is running late and cannot meet its production goal<\/li>\n
  2. Tesla will have sub-par production quality under the tent, i.e. it will have to fold its tent (pun intended)<\/li>\n
  3. Tesla will run out of cash<\/li>\n
  4. Tesla will have to take a massive write-down on its production facilities \u2014even if it does it is non-cash and so how that matter is not clear to us?<\/li>\n
  5. The 9% employee reduction announced by the Company portends further trouble<\/li>\n
  6. Perhaps the shorts planted a rogue employee on the inside as well<\/li>\n
  7. Maybe a stray firework on the 4th of July will burn down the tent \u2014 Highly unlikely and speculative on our part, but anything is possible given the bent shown by the shorts so far!<\/li>\n
  8. Tesla\u2019s factory has more fires during the production process and more often than others<\/li>\n
  9. Tesla\u2019s cars are killing drivers by misguiding drivers on the capabilities of the autonomous self-driving system<\/li>\n
  10. Tesla\u2019s workers are overworked and are getting injured on a recurrent basis<\/li>\n<\/ol>\n

    All of these stories have made multiple rounds in the media of all types, and we hone in particularly on number 10 here, i.e. Tesla factory workers reveal pain, injury, and stress: Everything feels like the future but us\u2019 . It is our humble opinion that these are \u201csour grapes\u201d stories. As an analyst, typing on the keyboard gives you carpal tunnel, tennis players get tennis elbow, basketball stars pull hamstrings, and soccer stars hurt their shins. That\u2019s life. But in the case of Tesla, this tsunami of so-called lousy news was accompanied by a significantly rising short position as illustrated in Figure 2.<\/p>\n

    Figure 2: The Shorts have It \u2014 They Really do<\/h3>\n

    \u00a0<\/p>\n

    \"\"<\/p>\n

    The stock remained volatile but did not break down, whereas the shorts raised their bets from below 17% of shares outstanding to 23% in June. This trade has not gone well for the shorts and is unlikely to provide a breather anytime soon. If there ever was a doubt, one should refer to the following story describing the travails of Greenlight Capital of David Einhorn fame: Einhorn\u2019s Greenlight fell 7.1 percent in June, down 18.3 percent this year. We are not beating up the losers, because any of us could be wrong anytime, but merely highlighting that the bears are already down more than $ 2 billion on Tesla trade.<\/p>\n

    Monday morning a covering frenzy could ensure sending the stock upwards to $500 by the end of July.<\/p>\n

    Moreover, we estimate that the announcement of opening a factory in China in August 2018, or September 2018, will materially improve Tesla\u2019s prospects, as well as, its valuation.<\/p>\n

    There is a lot more to say, but for the time being, all that matters is that Tesla exceeded the goal it set for itself and finally delivered on its promise. We would not be surprised if multiple stories outlining a negative narrative continue for a while.<\/p>\n

    Nonetheless, for bulls like us that, Tesla\u2019s announcement is good news. Bears need to find a way out of this mess. Tesla has a market capitalization of only $60 billion or thereabouts. Facebook Inc A (FB US), Amazon.com Inc (AMZNUS), Apple Inc (AAPL US), Microsoft Corp (MSFT\u2019 US), Netflix Inc (NFLX US), Alphabet Inc Cl C (GOOG US), Alibaba Group Holding Ltd (BABA US), Tencent Holdings Ltd (700 HK) are all worth a lot more. Tesla will be a worthy addition to that walk of fame in a couple of years.<\/p>\n

    In the meanwhile Good Luck to the Bears.<\/p>\n<\/div>\n

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    \"\"<\/div>\n
    \n
    Neeraj Monga<\/div>\n<\/div>\n<\/div>\n
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