Tesla Short Reverses Course: Automaker Too Compelling To Ignore

OCT 23 2018 BY DOMENICK YONEY 97

Oh, look, a flying pig!

Citron made its fortune by betting against companies, shorting their stocks. Basically, they look for signs of weakness and place bets that their share price will fall. They are a long time trader of Tesla shares and have released a number of notes in the past about their bets against the automaker. Today, though, just after the Silicon Valley company announced it will release its financial earnings on Wednesday (which was rather short notice), Citron published a 9-page note (see gallery below) saying it has reversed its position for the moment and is now long. If you were also short TSLA, bring a heavy duty umbrella when you leave the house today because the forecast calls for a chance of sun and flying pigs.

The reversal of tone is remarkable. Five years ago, Citron said in a note of the Model 3, “By the time this product is even approaching market, there will be multiple other 200-mile range plug-ins that have been out for years.” Obviously, this prediction has turned out to be wrong. Sure, the Chevy Bolt is out there, but its sales pale in comparison to the relatively much more expensive Model 3. It’s not even a contest.

If you’re a Tesla fan, the report makes for great reading and is full of pithy comments. For example, “Like a magic trick, while everyone is focused on Elon smoking weed, he is quietly smoking the whole automotive industry.” Basically, though, the message boils down to this quote, “Tesla is destroying the competition.

Interestingly, Citron was one of the companies caught off guard by “The Tweet” from CEO Elon Musk about taking the company private and lost about $10 million because of it. They are still suing the company over that issue. Yet, they have now placed bets in the market that the share price will increase. Speaking of which, the company’s stock, TSLA, is up $15.20 (5.82%) today, as of this writing.

Be sure to tune in tomorrow when we report the final, official quarterly numbers and then follow the call with analysts in real time.

9 photos

Source: Citron

Categories: Tesla

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97 Comments on "Tesla Short Reverses Course: Automaker Too Compelling To Ignore"

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Viking79

These guys are ridiculous. We know the stock is going to skyrocket, but let’s play off peoples fears and drive the price down, make a good buying opportunity then say how great the stock is. The Q3 performance has been pretty obvious since August. If they are just now coming to this conclusion they are incredibly slow (they are not).

DonC

It’s just gamesmanship. They probably started buying after the stock cratered and plan to sell into the rally, if it materializes. You can find many different sayings on WS, but one of them is: buy on the rumor sell on the news. Since the stock price currently incorporates expected earnings (or lack thereof), you wouldn’t expect much movement unless there was something unexpected. Unless there is. LOL

Anyone who believes any of these releases is whacked. If these guys actually had an insight into what was going to happen, do you think they’d tell everyone or do you think they’d trade for their own account? And this holds for the longs as well as the shorts. It’s just posturing to gain a short term trading advantage.

If you want to gamble sports betting is better than day trading because in the former you only pay commissions when you win.

REXisKing

They have the “insight” of the clear reporting of CleanTechnica about Tesla’s dominance of the industry in EV’s.

At least they can see reality when their money is at risk.

REXisKing

Two of those charts look extremely close to what has been published in CleanTechnica.

DrDauger

If you look closely at the bottom of those charts, it says “CleanTechnica”.
They’re from this article:
https://cleantechnica.com/2018/10/21/18-nasty-tesla-charts/

ffbj

Most of this is simply wrong.

Paul Smith

No, it’s you that has simply been wrong.

Pushmi-Pullyu

Wishful thinking and denying reality does not actually change reality.

Nix

Yes there’s no revelation here. They just want to play the volatility. They want the stock to go up so they can short it again and go back to bashing TSLA again

Their free stock advice is self serving.

Pushmi-Pullyu

“If these guys actually had an insight into what was going to happen, do you think they’d tell everyone or do you think they’d trade for their own account?”

Exactly! Bravo, well said!
🙂 🙂 🙂

I’ve said much the same in the past, but you’ve said it so much better here!

Do Not Read Between The Lines

They’re ridiculous in some of their report, certainly.

MDEV

This is market manipulation, SCC should look into this. Shorters are in the business of destroying industries for a profit.

Pushmi-Pullyu

Oh, how I wish that the SEC would investigate the organized fraud perpetrated by long-term TSLA short-sellers, in posting “pravduh” in articles and comments all over the internet and social media; an organized fraud attempting to manipulate Tesla’s stock price!

It’s so hypocritical of the anti-Tesla FÜDsters to accuse Tesla and Elon Musk of committing fraud, when that is precisely what they do every day!

JoeInTheUK

Wow. That is astonishing and a real kick in the head to many of the long term critics of Tesla.
Definitely worth reading the whole thing.

Mark.ca

They assuming the TM3 sales are mainly new orders and not from the backlog. Mid range will be but the rest? I don’t think so.

Doggydogworld

Early MR buyers are reservation holders who were waiting on SR. They realize MR with full credit is roughly the same price as SR with half or quarter credit.

Mark.ca

No, these were already converted by LR….hence the reason for waiting this long on the MR.

Ron M

Can’t wait for Chanos to admit he was wrong.

antrik

I doubt he will ever admit it… More likely just get out quietly while nobody is watching.

Pushmi-Pullyu

You’ll be waiting a long time. His sort never do.

Henry

This must be April Fools’ day.

TM21

Wow.

madda

Teslas achievements aside, who would have thought in 2013 that traditional automakers would still care so little about electric cars in 2018?

Mark.ca

I’m shocked…and turned pessimistic for the near future. They will not change.

REXisKing

It’s almost as if these CEO’s were personally bribed by the oil industry.
Just like Bill Ford having to Fire 3 CEO’s before one would actually get on the EV agenda.

pjwood1

Ford, especially. I mean, it was easier to live with customers who go looking for trucks, but forcing trucks upon brand-loyal car owners?
https://tinyurl.com/y8eohwhb

dmm1240

Much more basic, IMO. People resist change. They want tomorrow to be just like yesterday. New makes them extremely uncomfortable. It’s a difficult attitude to put aside. The CEOs of Daimler, Ford, Toyota, etc look out at their empires and tally up the cost of all their potentially stranded assets and naturally want to move to protect them. That’s the fool’s play but it happens again and again. It will this time as well, it always does.

Ron M

They probably in kahots with Koch Brothers and the Trump swamp.

Milfan

Exactly, the entire band of automakers, auto-media and most of the shorts are bribed by the oil industry.
This is not going to end tomorrow or day after, but will continue for at least another 20 years.

Luckily Chinese have entered the bandwagon and are made it big and in the process pulling other countries ahead.
Naturally when it comes to companies, Tesla is the leader pulling ahead.

REXisKing

The Chinese make policy by using the best in Science and Economics.
They tell their industry to get into the latest tech field and dominate it.
We have a population that ridicules Krugman, Shiller, Al Gore, Stiglitz, Roubini…
We determine policy based on those losing marketshare, but with the money to fund politicians and lobby armies. Those companies that are dying, but want government policy protection from the economic disruptors.

We will never make America Great Again, when policy is bought, vs. brain power.

Thank you US Supreme Court for allowing our Democracy to be constantly Up for $ale, on all issues. And a US news media, that is paid “Market Mover” bonus’s for “stories”.

Michael

It’s not that they don’t want to. They simply cannot do it without destroying tens of billions of dollars in value.

This really is a trap from which a couple of them might not escape.

REXisKing

Assuming these CEO were Business Majors.
Harvard Business School has a quote about Disruption.
A well known quote: If you don’t disrupt your business someone else will.

Note: Steve Jobs listened.
The iPad sales cannibalized laptop sales.
The iPhone sales cannibalized iPad sales.
And they still do.
Yet, Apple dominates.

dmm1240

I’d add in the iPhone destroyed Apple’s then lucrative iPod business too.

chano1

iPod was subsumed into iPhone, which went on to sell far more than the iPod ever did.

Brian

Better to loose billions than the whole company.

dmm1240

They will be forced to change… or die. Some of the giants of the industry will go belly up over the next decade. The European automakers are being forced into the future by their governments and the Chinese. I’m pessimistic that Ford will be around by 2030. GM has a better chance but needs to get moving. Mighty Toyota is not well positioned though it’s hard to see at this moment.. Nissan gets it. Fiat Chrysler, no. It’s going to be bloody, but they all have had ample warning.

The important thing to remember is that disruptions typically do not take 30-40 years, most take 12-13 years. Kodak owned the photography industry in 2000 and held the first patents on digital cameras. They refused to adjust because they didn’t want to kill their lucrative developing and printing businesses and were forced into bankruptcy in 2012. Steve Jobs knew the iPhone would kill the iPod but went ahead with offering music on Apple’s new handheld computer that also made phone calls. Look at Apple today. The auto industry is in for as profound a shakeup.

Ron M

They’ll change because the largest auto market China is demanding EV and the percentage of sales they want increases every year.

westcoaster

I know it has been mentioned before but look at Kodak and how it went, it’s just making the wrong call and paying dearly in the long run. It happens.

DrDauger

I did. I wrote some of this material in 2013:
http://tesla.dauger.com/disrupts/incumbentsshackles.html

Mark.ca

Citron going long…pure comedy!
Now i have seen it all in this cycle. This bull is way too fat to satnd on its own feet.

Michael

S&P -1.5%. TSLA +6%.

Yup.

Mark.ca

Bull=market run started in 2009

REXisKing

TSLA up 9% at 12:31 Eastern.

drpawansharma

Yes what would I see next, chanos going long on Tesla?

G2

…and Boob Putz buying Tesla stock while crowing how great his Model X drives?

antrik

FWIW, he has always been saying that Tesla’s vehicles are fine…

chano1

Isn’t that Klutz?

ffbj

Well, Do’h. Longtime Tesla shorts had to have their diaper changed. Let’s take a short trip back at some of the crap they filled it with:

Citron Research said it is shorting the electric car maker, saying that the supply and demand problems should take down the stock to $100 by the end of this year.
“Citron shorting $TSLA. Supply AND demand problems should take down to $100 by year end. News flow all around does not look good for stock,” Citron Research said on its Twitter handle. –[March 2016]

I guess in all their in depth research they never bothered to come to this site, and read some truly insightful and correct commentary ala Tesla and its disruptive capacity, and their great cars.

Michael

To be frank, while the commentary turned out to be correct on a lot of fronts, intermixed in there is an awful lot of fantastical thinking. So it makes it that much easier for someone preternaturally inclined to doubt that EVs could be viable to dismiss the wheat along with the chaff.

To Left’s credit, when the facts became incontrovertible, he actually changed his mind. Imagine if Trumplandians could take that same small trip!

Doggydogworld

Not such a small trip for some…..

Ron M

Trump no way he’s smarter than the Fed, all the other nations on earths who believe in climate change. He also said he’s gonna give the middle class a 10% tax cut before the election.
I just have a hard time seeing him at rallies and all those people are gobbling up all the stuff he says.

drpawansharma

Best president since Raegan. Brace for another term.

REXisKing

Yes, they’re now pushing for lower capital gains tax rate, again.
This is where the rich, by literally doing nothing, pay lower tax rates than most of the Trump Voters.

Ron M

Don’t forget there battery storage business may end up bigger than there EV business.

antrik

Apparently their short thesis was primarily based on expected competition that never materialised… At least that’s what they are claiming now.

David Cary

And that is reasonably fair. Most commentators have felt competition was coming. Common sense would mean competition is common. Many hear have been saying that legacy automakers can’t/won’t but that remains a minority position.
Auto manufacturing is a very capital intensive business. It is not digital cameras (or film manufacturing). Change is an order of magnitude harder. Apple killed the iPod, but that is chump change compared to Ford killing the F-150.
Interesting that the market lately is coming around to this reality. Ford and GM and down 30% since beginning of year and the Mid June spike. That is Tesla like volatility.
Down 30% in a stable to growing market this year – for the 2 large US auto companies. The market has spoken. TSLA of course hit 30% below its peak a week ago also but yesterday erased a lot of that and it has always been a super volatile stock.

james

It’s a shame Tesla cannot sue them for the millions they made down talking the stock. Especially in light of the quote from their previous commentary.

Michael

They’re entitled to have and share opinions that disagree with yours, even if their doing so hurts a company you admire. The case for a suit does not exist.

Xcel

Well, this also works in the other direction, and the forces are much stronger.

Pushmi-Pullyu

The case for a suit does not exist, really?

There has been an “urban myth” rumor going around for some decades, accusing Proctor & Gamble of supporting the “church of Satan”, and claiming that P&G’s logo has Satanist symbols hidden in it.

Snopes.com says:

Although the origin of the P&G satanism rumor is unknown, Procter & Gamble has over the years initiated a number of lawsuits against Amway Corp. (now known as Alticor), a vendor of household products (many of which compete with Procter & Gamble’s brands), charging it with fomenting the slander… and in March 2007 a jury awarded P&G $19.25 million after finding that four Amway distributors had spread false rumors about P&G to advance their own business.

Please explain to me how an investment firm deliberately spreading utterly false smear campaigns about Tesla, in order to manipulate Tesla’s stock price and promote their own short-selling investment, is materially different than Amway distributors spreading smear campaigns to get people to boycott a competitor’s product.

Please explain how that is ethically, morally, or legally different. Because I don’t get it. I don’t see any substantial difference.

https://www.snopes.com/fact-check/trademark-of-the-devil/

rey

Andrew Left eating his lemons? or is he making lemonade out of his lemons?

Michael

He’s made the lemonade and now he’s selling it back to us.

G2

…or drank the lemonade and is selling it back.

pjwood1

..Spiegel and Einhorn would call it the purple kool-aide.

REXisKing

Anyone else find they can’t see the pictures/charts because Google Ad’s are so INTRUSIVE?

Mark.ca

YES!!!

REXisKing

I have downloaded each one, and can see it fine in Apple Preview.
Google: Turns own product to SH*T.

Michael

That report is devastating to the short case. Can’t wait for the 10Q!

Doggydogworld

The report is rehash with nothing new. It’s remarkable because of the writer, not the content.

antrik

I totally agree that the content is unremarkable and only the source is — but that doesn’t contradict the observation that it’s pretty devastating to the “Tesla is at the brink of ruin” narrative 🙂

CDAVIS

It’s great to have Citron aboard as a Tesla supporter!

Congrats Tesla Team for converting former Tesla professional critics to current Tesla supporters… no easy task.

The Tesla Team’s great success in making Tesla the #1 EV car maker is an astounding business success story of vision, grit, & guts that the critics can no longer paint in negative tones without exposing themselves as detached-from-reality contrarians.

Any bets when Jimmy folds?

Anti-Tesla Wolfpack leader Jim Chanos said: “[Tesla] is worthless… not a leader…”

Mark.ca

Don’t worry, it won’t be long before they flip again.

Doggydogworld

Exactly. These guys are traders, not long term believers.

pjwood1

TSLA has definitely been one, to “play”.

REXisKing

It’s like right wing propaganda. Turn your opponent’s best feature into a flaw.
“Tesla is worthless … not a leader”
Where in reality Musk is one of the USA’s greatest business leaders.

CDAVIS

@REXisKing said: “It’s like right wing propaganda…”
———————-

Something to consider:

Politicizing EV serves only to divide and alienate a segment of past and potential future EV converts… it’s counter productive and ultimately serves to benefit those with an anti-EV agenda.

Divide comes before conquer…

REXisKing

Send an email to the oil industry and the Koch bros.
Tell them that’s a bad idea.

esto perpetua

You could change ” right wing propaganda” to ” Left wing propaganda” and nothing will be different.

Pushmi-Pullyu

We don’t see left wing so-called “think tanks” — that is, propaganda mills — spreading anti-EV pravduh and FÜD, nor paying writers to write anti-EV propaganda pieces which pretend to be “articles” that get published at major news sources.

There’s quite a significant difference there.

REXisKing

Any way you guys can break out these chart/pictures?
The Google Ad’s are really destroying the ability to zoom in and see the whole page.

Doggydogworld
REXisKing

Thank you.

DrDauger

Or you can go to the CleanTechnica article where he swiped the charts:
https://cleantechnica.com/2018/10/21/18-nasty-tesla-charts/

esto perpetua

I’m sure more shorts will follow. By pushing up suddenly their earnings report, Tesla must have good news to announce.

ModernMarvelFan

This just shows that all along that Elon shouldn’t worry about shorts in the long term. When you deliver quarter after quarter, the shorts will get burned on their own.

Just focus on business and moving forward and don’t waste your time and energy on shorts. Certainly not worthy getting into trouble with SEC on those short sellers.

TomArt

I have felt the same way, and I am disappointed in Musk, just when things were really rolling, he had to put his foot in his mouth. Well, we’re all human, I guess… stress is a cruel master.

William

Up over 9% today, hopefully this will take Tesla back over $300. by the close of this weeks trading!

All I’m hearing is the short chirping of Crickets, from the likes of Jiminy C. Hanos

https://goo.gl/images/S2SES6

Model3 Owned- Niro EV TBD -Past-500e and Spark EV,

Leader of shorts, during tail and going long on TSLA. Music to EV enthusiasts.

I remember seeing that TSLA is one of the heaviest companies shorted out there. Happy they are eating some crow and hope to see that next quarter, and the next and next too.

REXisKing

I believe the short interest has dropped from 40 million shares to 33 million.

amt

The Stock MANIPULATORS !

Pushmi-Pullyu

Precisely. Calling them mere “shorters” misses the point entirely. Most stocks get some amount of short activity. But very few of them have organized campaigns of smear campaigns, “pravduh”, and FÜD all targeted at manipulating the stock price.

Jimi seko

The completely ironic thing is Musk and Tesla have always welcomed and encouraged serious competition but legacy automakers are struggling to catch up

Allan

Sounds like they knew they were in trouble for a while but tried to hang on, then cashed out their short in panic because of the “taking Tesla private” tweet, after that they had nothing to lose and went long, but are still suing so they can have it both ways.

That’s how I’m reading it. They knew they made a bad call, tried to cut their losses, went long and now they wanna manipulate the stock in the positive direction while they try to recoup their short losses in court.

Quiviran

It’s a two-step process. First you talk the market down and buy a lot of cheap shares, then you talk it up and sell those shares for more than you paid. You’re just helping to hold the megaphone.

Pushmi-Pullyu

Yup, the classic “pump and dump” scheme, or rather the reverse scheme, which I suppose would be “dump and pump”.

Dam

usual pump and dump IMO