Investor's Corner
The epic battle between Elon Musk and the Tesla haters
In a fascinating article in Institutional Investor, Michelle Celarier writes that Tesla [NASDAQ: TSLA] is: “the biggest short in the U.S. market; about 27 percent of Tesla’s free float is short, for a value as high as $10 billion” according to S3 Analytics, a firm that tracks short sales. That said, “the stock has soared more than 1,300 percent since Tesla went public in 2010. It is the first automaker to go public since Ford in 1956, making it one of the darlings of the post-financial-crash bull market.”
Photo credit: Tesla
It turns out that one of the most notorious Tesla shorts is Mark Spiegel. And Spiegel hasn’t even driven a Tesla yet. He says, “I’m more into sports cars.” According to Celarier, “Spiegel has become something of a zealot on Tesla. His small hedge fund, Stanphyl Capital Management, runs a mere $8.5 million, given that it was down 20 percent this year through August. That’s largely due to his short of Tesla, which had gained 74 percent this year, making it the worst-performing short of the year.”
However, there are bigger players out there shorting Tesla. Celarier reports that: “Everyone who’s anyone in Wall Street’s small and clubby world of short sellers has been short Tesla at one point or another… In the past, some of them also shorted Google and Amazon — other high flyers who weren’t making a profit — and somewhat sheepishly [now] admit they were wrong. Clearly, these guys are not dreamers from California’s La La Land, and Musk’s grand plans and his ‘save the world’ ethos can elicit a few eye rolls.”
Another well-known Tesla short, James Chanos of Kynikos Associates, “has been railing against Tesla for at least two years on CNBC and at numerous conferences. He has gone so far as to call Tesla a cult.” Speaking of Tesla’s CEO Elon Musk, Chanos proclaims, “People want to believe he’s some sort of visionary… In a milieu of boring people, they think he is changing the world. He’s not boring. He’s somebody they can attach their hopes and dreams to.”
Photo credit: David Paul Morris/Bloomberg
So why does Tesla attract so many arguments on Wall Street? On the one hand, “Looking at its balance sheet, Tesla is [considered] the perfect short. But its pioneering status in an industry facing wrenching technological upheaval, and its charismatic CEO, has won it legions of admirers and turned it into a battleground stock. Sure, Tesla’s lofty stock price makes it a risky buy — but also a perilous short.”
Anger and hope permeate both camps of investors. “Short sellers berate Tesla investors as momentum chasers, tree-huggers, or simply Elon Musk groupies, but these investors have bought into a vision that has already made great leaps toward building a sustainable energy ecosystem — a costly endeavor that has no shortage of well-heeled enemies.”
And while an army of short sellers persist, plenty of Wall Street’s power players remain steadfast Tesla longs: “The biggest holders, aside from Musk, are mutual funds like Fidelity Investments, which has owned the stock since the IPO. With a current 12.8 percent stake (down from a high of 15 percent), the mutual fund giant is the largest institutional investor in Tesla, and portfolio manager Kyle Weaver says Fidelity has a long-term perspective on the company that is playing out largely as expected.”
Tesla fleet lined up outside of the service center in Amsterdam [Photo credit: Teslarati App]
“It was the worst short I’ve ever had,” says Whitney Tilson, managing partner of Kase Capital Management, who was short when the stock went from $35 to $205. Last month, Tilson told investors he’s shutting down his funds due to poor performance. Tilson explains, “I can do the numbers and see how much money the company is losing, but you’re short an incredibly maniacally driven CEO, with maniacally driven engineers assaulting the world’s largest industry. If they succeed, Tesla could be a $400 billion market cap company.”“The internal combustion engine is toast long term. It’s game over. The costs of making an internal combustion engine do not go down, while the cost of battery technology has gone down every year,” says Fidelity’s Weaver. “The secular trends that will drive Tesla’s fundamentals are a decades-long trend.” He also applauds Tesla’s environmental mission, “I don’t want to bet against that in an emotional sense.”
Musk is also not afraid to openly attack Wall Street’s short sellers. Let’s not forget, “Musk, who has talked about being bullied as a child, seems to delight in taunting his tormentors. In 2013 he gloated on Twitter, ‘Seems to be some stormy weather over in Shortville these days,’” and once cautioned short sellers that a “tsunami of hurt” was coming in a televised interview.
Celarier writes, “To be sure, a mania surrounds Tesla… [and] betting against Musk is a tough proposition. Tesla has already survived near-bankruptcy events, and Musk has plenty of friends in tech companies with much higher valuations, like Larry Page at Google, that could afford to partner with Tesla or take it over. (Google had struck a handshake deal to buy Tesla during a near-death moment in 2013, according to Vance’s biography.)”
There’s also massive opportunity for Tesla in China: “Earlier this year, China’s Tencent Holdings took a 5 percent stake in Tesla. China is proposing to mandate a zero-emissions standard in 12 percent of new cars by 2020 and is considering letting wholly owned foreign electric-car companies operate there. The Chinese market is expected to be huge, and Tesla is charging ahead there. It is already building a new supercharger network in the country and plans to both build and sell cars there.”
Such realities make shorting Tesla, for all its financial shortcomings, a difficult call. As Tilson puts it, “I don’t want to be short open-ended situations. The tail risk is just too high.”
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Note: Article by Matt Pressman, originally published on evannex.com
Source: Institutional Investor
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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