What’s Up With Those Short Sellers And Their Crusade Against Tesla?

Tesla

NOV 28 2018 BY EVANNEX 43

HOW ARE WALL STREET’S SHORT SELLERS HOLDING UP AGAINST ELON MUSK AND TESLA?

Love ‘em or hate ‘em, you have to give the short sellers credit for their dedication. Hedge fund manager Mark Spiegel even follows the market while taking a bath – two computer screens perched near the tub keep him apprised of the latest ill winds. Much of his time is spent sitting at his dining room table, sending a steady stream of tweets explaining why Tesla will eventually crash and burn, making Spiegel an even wealthier man.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Tesla logo (Instagram: investorsniper)

Spiegel, a colorful character profiled in a recent Washington Post article, is part of one of Wall Street’s most aggressive, collective short bets against a single company in history – a $10 billion wager that says Elon Musk’s dream of freeing the world from fossil fuels will fail.

So far, that bet has been a loser, but Spiegel isn’t ready to back down. “I am very patient,” he told the Post. Others have proven less stubborn. Well-known short Andrew Left, who has been a vocal critic of Musk and Tesla for years, recently relented and went over to the long side, saying “nobody can change the narrative on this thing.”

As Tesla has grown, many foolhardy short sellers have felt the burn. However, the Post points out that it isn’t just Tesla. US stock markets have been on a roll for nearly a decade, and the nabobs of negativity have taken a beating overall. Since 2013, short sellers waging campaigns against particular companies have lost an average of about 0.5 percent, according to Activist Insight Shorts. Since the 2008 stock market crash, the number of hedge funds focused on betting against companies has fallen by more than half.

Shorting is by definition a contrarian activity, and therefore a risky one. In addition to monetary losses, those who would pollute the punchbowl also face moral opprobrium. “These people are much more concerned about profits than what’s best for our children,” Tesla investor Ross Gerber told the Post. “Morally speaking, you can short Snapchat all you want. Go short Facebook. Tesla’s whole purpose is to create an electric infrastructure so we can address the issue of climate change.”

Some short sellers object to being cast as villains, and say that they serve a useful function in the market, blowing the whistle on fraudulent companies such as Enron. Fahmi Quadir of Safkhet Capital targeted Valeant Pharmaceuticals, which recently saw its stock price tank amid accusations of massive fraud. Quadir is also short Tesla. “I need to support the value short sellers play in the market,” she said. “Short sellers are like our first line of defense. They will be asking the questions that others won’t be to get to the truth.”

Above: Here’s why one high-profile Tesla short seller, Andrew Left, decided to change his mind on the company (Youtube: CNBC Television)

Elon Musk’s opinion of the shorts has evolved over time. In 2012 he tweeted that while “they cause me grief, I would defend the rights of shorts to exist.” More recently, as the attacks against Tesla have swelled to a tidal wave of FUD, his disdain has grown. “The last several years have taught me that [short sellers] are reasonably maligned. What they do should be illegal.”

While Nasdaq and other institutions have recently taken measures to require more transparency from short sellers, an outright ban is far from likely, and probably not as good an idea as frustration makes it seem. What the shorts fear far more than legal action is big losses, and in Tesla’s case, that’s just what they’ve been getting. Mark Spiegel’s hedge fund is down about 15 percent so far this year, mostly because of his bet against Tesla. The stock’s extreme volatility adds another layer of risk. “You wind up essentially getting whipsawed many times,” Spiegel said. “We have realized a lot of losses there.”

However, Spiegel and his colleagues will continue to prepare for the best and hope for the worst. “Part of my job is to make sure it doesn’t crush me before it collapses,” he says.

Another prominent Tesla short seller is David Einhorn, who was profiled in a recent article in Institutional Investor. Einhorn, a billionaire investor who was once regarded as a stock market genius, has fallen on hard times. His Greenlight Capital hedge fund has trailed the market since 2009. From a peak of $11.8 billion in 2014, Greenlight’s assets had shrunk to $6.4 billion by the end of 2017. In recent years, Einhorn has lost a bundle shorting various companies, including tech high-flyers such as Netflix, Amazon and Tesla.

In its glory days between 1996 and 2006, Einhorn’s Greenlight boasted annualized returns of 26 percent. His attack against Lehman Brothers, which began less than a year before it filed for bankruptcy, made Einhorn a short selling legend – in some circles, his name is used as a verb to describe the process of destroying a company’s stock price by means of criticism in the media.

Above: Short Seller David Einhorn (Image: Varchev)

For some in the short community, Einhorn remains a hero who’s just going through a rough patch. Among his admirers is that Brainiac of the bubble bath, Mark Spiegel. “He’s a terrific guy, and I’m sure he’ll come back,” says Spiegel. The two have collaborated on anti-Tesla presentations in the past. Spiegel still hopes to share a toast with Einhorn the day TSLA drops to zero, but he realizes that failure isn’t assured. “If David doesn’t come back, then I won’t come back.”

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Written by: Charles Morris; Source: Washington PostInstitutional InvestorCNBC

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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43 Comments on "What’s Up With Those Short Sellers And Their Crusade Against Tesla?"

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Andy P

“Short sellers are like our first line of defense. They will be asking the questions that others won’t be to get to the truth.”

…or regulators could (and should) be doing that.

Betting on failure, then acting in any way necessary to make that failure happen, solely for the purpose of enriching oneself, is negative, destructive, and profoundly immoral.

Doggydogworld

“or regulators could (and should) be doing that.”

LOL. Regulators are fully captured. They don’t even act when handed information on a silver platter. Harry Markopolos gave them everything they needed on Madoff and they ignored it all. David Einhorn gave them mountains of hard evidence on Allied Capital (including fraud against the federal government) and they turned a blind eye. Read his book, “Fooling Some of the People All of the Time” before you extol the virtues of our infallible protectors, the government regulators.

REXtoCheckMate

And LYING with every newsletter, post and interview.

Remember the shorts got on the Financial News and lies about the solar industry: Buyers had low Credit ratings and would default. Except. They didn’t, they had high FICA scores and were excellent credit risk.

Hide behind Enron.
However the industry as a hole is a bunch of immoral unethical scum.
And where is the SEC?

These guys get on Financial News and Lie and they’re not in court?

Ron M

Unfortunately if lying was a crime Trump would be in prison.

Recoil

Yup what was that big lie he told again? Was it if you like your healthcare plan you can keep it? Or was it if you like your doctor you can keep them? Maybe it was every family in America will save $2,500 on health care? Or was it when he said in 5 years when I am no longer president I will buy a volt? Maybe it was ISIS is the JV Team? Or the attack on the embassy happened because of a YouTube video?

Dante

It’s a losing game. 30,000 people are trying to make Tesla successful everyday and hundreds of thousands on a waiting list for their products. This against a few hundred people who’s only power is pessimism. Tesla doesn’t need the markets to stay afloat so shorts can’t do anything to them. Anyone test driving a Tesla quickly becomes immune to it all.

John Doe

Can’t be many shorts now? Model 3 is in volume production, and will be for several years. Money in the bank. As long as they play it pretty safe with Model Y, the truck and so on. . Shorts may have serious trouble
Apple short sellers have made a killing on the other hand thanks to Trump. Tariffs = money in the bank for shorters.
Apple is so expensive that they can not just increase the product price more. They are balancing on a razors edge with how much money they can charge and how cheap they can manufacture the products.

Nix

Those are the old goalposts. They keep moving them each time Tesla proves them wrong.

sri

True. Even if one buys that argument, a sell rating is all that’s needed to expose the truth. If the short sellers are right about a company, all they are going to do is make the drop extremely fast leaving the normal retail investors stranded. This is just the active short sellers attempt to justify their existence.

Chris O

I agree with the vision that it shouldn’t be legal to be invested in a company’s downturn because it could become a self fulfilling prophesy as -like Mark Spiegel- shorts will inevitably start undermining the company they are shorting with a relentless FUD campaign in which truth and facts don’t necessarily play a big role. This FUD won’t just affect investors, it could spill over to consumers who will get the idea that they are buying products from a company that might not be around for much longer anymore which could get the downward spiral going.

Luckily so far Tesla sales don’t seem too badly affected, despite the fact that even the MSM (right up to the NYT, that incredibly started quoting Mark Spiegel) have picked up the short memes but I do think that shorts have managed to taint the Tesla brand to a certain extend with their endlessly repeated FUD and negativity, just chipping away at the positive vibe surrounding the brand.

Mil

I agree. Luckily for Tesla, I think the FUD’s days are numbered. Word of mouth is a powerful thing and every single week, Tesla is making thousands of new Tesla customers who become ambassadors for the brand. The average Joe often believes what they hear in the media (i.e. all the FUD) but being able to speak to someone credible (e.g. family, friend, neighbour, colleague) who owns Tesla and sings their praise is a powerful thing. Once that person speaks to a few different Tesla owners, eventually they will see the truth.

John

Amen. I wholeheartedly agree with you, and that concept that DAILY there’s hundreds if not thousands more Tesla/EV owners than yesterday is pretty powerful. That ain’t gonna just stop.

And regarding shorters- Elon and Co. ain’t just gonna pack their bags and simply go home. They’re gonna play EVERY piece on the chessboard before giving up. And the deck has been stacked against them since their inception- this ain’t NEW to them! Tesla has been forced to grind, claw, and fight for every inch of ground since the beginning- PSST, shorters, they’re pretty good at it.

Doggydogworld

Should it also be illegal to invest in a stock’s success, because it could also become a self-fulfilling prophecy as longs – like ARK’s Cathi Wood – spew $4000/share nonsense based on imaginary business models that Tesla is in no position to pursue?

Pushmi-Pullyu

It should be illegal to knowingly and publicly tell falsehoods about any company in which one is invested; either positive falsehoods or negative ones.

In any other realm of human discourse, lying in order to enrich oneself is considered fraud. Why is either promoting FÜD about a company, or “pumping” a stock, considered legal?

How I wish the SEC was empowered to go after those promoting stock fraud in any form!

But when it comes to Tesla, why would anyone promoting the company feel the need to lie? The truth serves us Tesla fans just fine! 🙂

One of the reasons that the anti-Tesla “Wolf! Wolf! Wolf!” pack isn’t having much of an effect on Tesla’s reputation is that they have very few if any honest arguments. Anyone reading much about the company will very quickly realize that almost everything Tesla bashers say about Tesla and its cars, is a lie.

sri

What’s the bad side of having successful companies in a country? Having price targets and buy/sell ratings are what normally analysts do. You can only take a company so far with just hype. Cathy wood can not take the Tesla stock to 4000 if Tesla doesn’t deliver

REXtoCheckMate

The damage the SEC is ALLOWING is small innovative companies can not go to Wall Street for listing, and then not be under constant short attack. They’ve DESTROYED the Market for Innovation.

IF the SEC doesn’t Correct this, we will see innovation in America Disappear.

Pushmi-Pullyu

Yes, I was astounded to read that NYT piece which presented Mark B. Spiegel as a reasonable person! Not a single word there about how he posts an endless stream of out-and-out lies about Tesla; about how he posts pravduh and FÜD on a daily basis.

Journalism at the NYT isn’t what it used to be. 🙁

Mike

I am so fed up with the BS that comes out of Wall Street and their focus on short term returns. I get the value of hedging and short selling, but if you truly have information that a company’s stock should go down then the FUD campaign is not really necessary. I have no respect for either these short sellers or the “buy the dip” Cramer-esque market hypers. It still amazes me that someone would take stock tips from Twitter or some blow hard on TV. This isn’t how companies should be financing their expansion.

Xcel

These guys are burning cash big time. They are also running out of time, the investors are coming to ask for their money and it is going to be a very ugly conversation. The pressire is mounting fast and they are known to crack under pressure.

John

God willing.

Buutvrij

Asking questions or seeking truth about company’s? Spreading FUD about a company that’s trying to make the world a little bit better, I might forget to brake if Mark Spiegel or Mr. Einhorn will appear in front of my car. They better hope AP will save them.

Lou Grinzo

Joking about hitting human beings with a car? Really?

Try to do better than that. I’m highly confident you can.

Fred

shorts are betting on the erase of ~40.000 employers + families income, welfare, life, as well on poising air, nature, water, creature. Thus shorts are criminals to be put in jail for lifetime, they are without ethics, honor, culture. Shorts are injuring humans indirectly but even heavily. Shorts are lying, blaming, falsifying. .Anything forgotten?

Lou Grinzo

Yep. You forgot all the lies from the longs still supporting fossil fuels and other destructive technologies. Do you want to jail them, as well? If so, who decides who is ultimately telling the truth and who is lying (note: NOT who is shown to be accurate or inaccurate) before we start throwing people in the slammer?

sri

In a fair society, lot of the intentional hiding of the truth by Fossil fuel companies and FUD campaign would be grounds for jail time

Yves Laurin

“If David doesn’t come back, then I won’t come back.”

I am praying very hard for this to happen

ffbj
Mark Spiegel? Well logical thought tells us that even when right he is wrong. What I mean by that is one point, and only one, that Spiegel was right on, Tesla is short of, burning through cash, was correct. Now that problem is mostly in the past though it may return in the future as Tesla continues to pump out product. The other points in his hour long thesis against Tesla are just laughable. Here are some of the other pieces of his diatribe against Tesla, and you won’t have to watch an hour long video to dig them out. 1. Tesla Killers are coming to destroy Tesla. (Not happening, hasn’t happened and won’t happen. Wrong). 2. Tesla has no advantage in Technology. (Wrong). 3. Tesla does not know how to make cars. (Actually that was fairly close at one time, but they learned how to do that, now it is simply, Wrong). Mark has been losing money, and more importantly his clients money for years, shorting Tesla, in a rising market. So opportunity cost, missing out on the market rise by having money in a losing short, is not a good plan. Persistence is not a value that should… Read more »
Pushmi-Pullyu

“Well logical thought tells us…”

I see what you did there. 😉

ffbj

Yes, a little insider evs joke.

Spider-Dan

It’s difficult to cry foul about shorts using FUD to unfairly drive down TSLA stock price after Elon Musk was handed a $20M fine by the SEC for pumping his stock price with a lie.

Stock manipulation is bad, whether it’s from people trying to drive the price down OR up. Our regulators should be a lot more active than they are. But ultimately, there is far more danger to the public from pump-and-dump schemes (or insider trading in general) than there is from short sellers. The amount of digital ink spilled on this site over shorts (mostly: by commenters) is disproportionate to their importance.

Pushmi-Pullyu

“It’s difficult to cry foul about shorts using FUD to unfairly drive down TSLA stock price after Elon Musk was handed a $20M fine by the SEC for pumping his stock price with a lie.”

No, it’s very easy. Two wrongs don’t make a right.

Too bad the SEC doesn’t go after professional FÜDsters like Mark B. Spiegel and “Montana Skeptic” for exactly the same reason they went after Elon Musk: Using social media posts in an attempt to manipulate the stock price.

Spider-Dan

It sounds like you’re saying you think the SEC should “go after” anyone who says something bad about a corporation in hopes of making the stock price go down. What would the hypothetical charge against them be… slander? And how would this policy be applied to people who say something bad about Wal-Mart, Uber, Facebook, etc? Your solution is far worse than the problem; you are basically advocating for censorship of criticism towards corporations. I say negative things about Fox all the time with the explicit intention of not only driving down their stock price, but driving them out of business entirely. Should the SEC fine me?

You cannot compare stock manipulation of corporate executives with insider knowledge to naysayers with an interest in corporate failure. The former is incredibly dangerous and can lead to the collapse of the entire stock market, while the latter is a necessary function of a society that allows free speech.

Summarizing that as “two wrongs don’t make a right” is like comparing a woman who changed lanes without signaling to a man who shot her in a fit of road rage and saying, “Both were in the wrong.”

Pushmi-Pullyu

“It’s difficult to cry foul about shorts using [FÜD] to unfairly drive down TSLA stock price after Elon Musk was handed a $20M fine by the SEC for pumping his stock price with a lie.”

No, it’s very easy. Two wrongs don’t make a right.

Too bad the SEC doesn’t go after professional FÜDsters like Mark B. Spiegel and “Montana Skeptic” for exactly the same reason they went after Elon Musk: Using social media posts in an attempt to manipulate the stock price.

Dam

Q3 is dubious and Musk has even acknowledged few days ago that bankruptcy was near earlier this year

Pushmi-Pullyu

😆 😆 😆

Well, Tesla’s 3rd quarter profits were certainly “dubious” for short-selling FÜDsters like you!

But “thanks” for that fine example of anti-Tesla pravduh. 🙄

Impartial Observer

Hopefully, Tesla’s Q4 will be better than The Boring Company’s Q4. TBC just announced that they are canceling their plans to dig their Los Angeles Tunnel. A group sued TBC for trying to cut corners by getting exempt from and skipping the normally required environmental review.

https://www.latimes.com/local/lanow/la-me-ln-elon-musk-sepulveda-20181127-story.html

Ron M

Short sellers will exist and there will always be entities that will spread false information to try and get there competition to fail. Who knows how much Koch Bothers has spent on trying to convince the public that Climate Change isn’t real.
They see renewable energy and EV’s as a real threat and spending 400 million to get there voice heard in Washington is just the price of doing business.
Short sellers must believe that the fossil fuel industry will win the battle and that EV’s will never become main stream.
However I believe Tesla has already succeeded and short sellers will continue to be big losers.

Pushmi-Pullyu

“Love ‘em or hate ‘em, you have to give the short sellers credit for their dedication.”

I certainly don’t have to give any “credit” to how anti-Tesla FÜDsters have been so totally consumed by greed that the difference between truth and lies has become utterly irrelevant to them.

Let’s be very clear: It is entirely possible to be an honest short-seller. Sadly, for some reason, all too many TSLA short-sellers seem to be seduced into an ongoing campaign of lies in an effort to manipulate the TSLA stock price.

Notice the sharp drop-off in anti-Tesla pravduh and propaganda after Tesla proved that it could indeed show a significant quarterly profit… thus firmly refuting the anti-Tesla brigade’s biggest false argument. Coincidence? I think not!

“Once you start down the dark path, forever will it dominate your destiny, consume you it will.” – Yoda

Pushmi-Pullyu

“Short sellers are like our first line of defense. They will be asking the questions that others won’t be to get to the truth.”

That’s nice in theory, and no doubt it holds true for short sellers of most stocks; that is, honest short-sellers.

Unfortunately, the sort of Tesla short-seller that posts to social media regularly about Tesla is almost never an honest short-seller. No, the short-sellers who actively post to social media about Tesla on a daily basis are almost invariably the sort who will say literally anything, no matter how big a lie it is, to damage Tesla’s reputation.

Claiming there is value in the endless stream of pravduh and FÜD churned out by the anti-Tesla “Wolf! Wolf! Wolf!” pack, is like claiming there is value in a barrel full of rotten apples.

rey

I guess Andrew Left figured that TSLA in the “market can stay irrational than one can remain solvent”. Andrew Left gone,Chanos MIA for weeks,D Einhorn quiet for now M.Spiegel in the Toilet still.

Nix

Both of these shorters make money on commissions and fees from getting people to buy into the hedge funds they manage.

They collect those fees whether Tesla goes up or down. They just need to CONvince enough investors to invest in their funds to keep the steady flow of fees coming.

Doggydogworld

But Cathi Wood charges no fees, I suppose?

Milfan

Worldwide, 7.8 percent of all gasoline is ethanol. If every country allows the sales of E10, E15, E20 blends of ethanol, then the oil consumption will decrease and the main support base for these shortsellers will decrease and they will quietly quit the market.

http://ethanolproducer.com/articles/15747/closed-doors-open-windows