Investor's Corner
Elon Musk’s near-$10M TSLA investment makes his battle with short-sellers personal
On Monday afternoon, Tesla CEO Elon Musk purchased nearly $10M in Tesla stock (NASDAQ:TSLA). Just a week after an eventful earnings call with analysts and a Youtuber, Musk added 27,097 shares of Tesla to his portfolio. To add some perspective, that’s just .08% of Musk’s total 33,665,421 shares in the company, worth north of $10.2B.
Musk’s stock purchase today wasn’t about increasing his ownership in the company; he has a hefty stock compensation plan for that. Musk was sending a message to the short-sellers of TSLA. The number of short-sellers has surpassed Musk’s holding for the first time in history, now rumored to be near 40M shares.
As of the last reporting date, 4/9/18 (available on 4/24/18), there were 38,258,654 shares held short in the company. That’s the highest in Tesla’s history, making the electric car maker the most shorted company by the amount of equity at stake. There will be an update on the total size of the Tesla short position this Wednesday after markets close, so stay tuned.
While this is nothing new for Tesla, Musk is starting to take it personally. His company is being hit every which way in the media, and that doesn’t feel good. I mean, Bloomberg created a graphic of Musk burning cash with his own flamethrowers, that can’t feel good.
Bloomberg’s Graphic depicting Musk burning Tesla’s cash with his own ‘Boring Company’ flamethrowers.
Graphic: Bloomberg/Getty Image (Animation: Hannah Recht for Bloomberg)
Typically over the past few years, Musk has made several statements acknowledging the high-value the market has placed on his company. Musk’s tone changed last week.
“Oh and uh, short burn of the century coming soon. Flamethrowers should arrive just in time,” Musk tweeted after the company announced they had burned upwards of $1B in free cash flow.
So why should short sellers believe Musk?
Valid question. The very notion of a short position makes it clear they do not believe in Musk. But history is on Musk’s side.
Let’s flashback to April 2013. At the time, I owned shares at Tesla, purchasing the stock just 8 months earlier, shy of $30/share. This was when the Model S production ramp issues and cash burn plagued Tesla’s stock. But on April 1, 2013, Tesla told investors that they should expect a quarterly profit to be reported for the first quarter. The stock shot up 16% that day and continued to rally for several months, gaining 455% over the next 6 months.
Just before these massive gains, Musk warned in a Fox Business interview that he thinks “it is very unwise to be shorting Tesla, it’s very unwise. There is a tsunami of hurt coming for the shorts.”
Musk is again facing similar challenges with the Model 3 — production ramp issues, a media blitz, and a massive amount of cash being burned. While it is still to be seen if Musk and the Tesla team of 42,022 employees can impress investors, I certainly wouldn’t be sleeping comfortably with a Tesla short position.
When asked on Twitter how this ‘upcoming pain’ for shorts compares to the last round, Musk responded with, “It will be next level. These are really big numbers.”
Disclaimer: This column does not necessarily reflect the opinion of Teslarati and its owners. Christian Prenzler does not have a position in Tesla Inc. or any of its competitors and does not have plans to do so in the next 30 days.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
