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Tesla short-seller goes long on TSLA: “The story has become too compelling to ignore”

[Credit: DarkSoldier 360/YouTube]

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Tesla stock (NASDAQ:TSLA) is up more than 5% on Tuesday’s intraday amidst news that prominent activist short-seller Andrew Left of Citron Research, who currently has a lawsuit against Elon Musk over his “funding secured” tweet last August, has gone long on the electric car maker. In a recent note published on Tuesday, Citron noted that it is reversing its opinion on Tesla because the company’s story has “become too compelling to ignore.”

Citron Research states that while mainstream media had been largely focused on Elon Musk’s “eccentric, outlandish and at times offensive behavior,” it has failed to notice that the auto industry is currently being disrupted by Tesla, particularly the Model 3. Left notes that simply speaking, “Tesla is destroying the competition,” as shown by the dominance of the Model 3 in the United States’ midsize luxury car market and the Model S’ reign in the large luxury car segment.

“It is in that spirit, and with a great deal of analysis and due diligence that we can say for the first time, Citron is long Tesla as the Model 3 is a proven hit, and many of the TSLA warning signs have proven not to be significant.”

A key driver of Citron’s turnaround for Tesla is the lack of legitimate competitors in the premium electric car segment. In his classic bold fashion, Left noted that when it comes to electric vehicle sales in the United States, “it looks like it is the competition that is taking the Ambien.” Citron further stated that a deep dive into vehicle sales data reveals that the Model 3’s demand is new this year, and that it’s pulling directly from Tesla’s competitors. Left also pointed out that the declining sales figures of Tesla’s competitors at a time when the Model 3 is being ramped show that consumers seem to be moving away from legacy brands.

The decline of the Tesla Model 3’s competitors. [Credit: Citron Research]

“People who are making their current car choices are moving away from other brands. – It is not just pent-up demand from people on the reservation list. If it were pent-up demand, those car classes wouldn’t be exhibiting such sharp declines year over year. TSLA is not just pulling customers from BMW and Mercedes but also from Toyota and Honda. Like a magic trick, while everyone is focused on Elon smoking weed, he is quietly smoking the whole automotive industry.”

Ultimately, Citron Research notes that it would not wish to be short TSLA at this point in the company’s history. Even if Tesla does not meet its profitability goals this Q3, Citron states that the company’s Gigafactory 3 project in Shanghai, the impending entrance of the Model 3 to the European market, Gigafactory 4 in Europe, the upcoming Tesla Semi and Model Y, and the rollout of the company’s first autonomous features with later iterations of Software V9, could allow the electric car maker to be added to the S&P 500 sometime next year.

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Apart from the dominance of Tesla’s electric cars in their respective segments, Left also states that recent moves by the company’s largest shareholders suggest confidence in TSLA’s future. Among these are T Rowe Price, Baillie Gifford, and Fidelity — all of which are sticking with the company despite the controversies surrounding Elon Musk. T Rowe Price even increased its stake on Tesla in Q3, buying 5.5 million shares last quarter.

“Tesla is dominating the industry with no advertising, no unions, no dealer network. Tesla has the most miles driven data by several orders of magnitude. No tequila, flamethrowers, or short shorts- just a revolution in the transportation industry.”

Citron Research points out that it is still pushing through with its case against Elon Musk over his “funding secured” tweet last August. Nevertheless, Left admitted that while he is not a fan of Tesla’s “overconfident CEO, (Citron) cannot dismiss what we are seeing in the marketplace.”

Tesla has been showing signs that it is hitting its stride with the Model 3 production ramp — an endeavor that has cost the company and its CEO greatly. The company’s struggle to bring the Model 3 to market — aptly dubbed by the CEO as “manufacturing hell” — has been described by Elon Musk as one of the most painful and difficult experiences he’s ever had in his career. Tesla appears to have hit its stride in Q3, though, producing a total of 80,142 electric cars including 53,239 Model 3, as well as delivering a total of 83,500 vehicles, comprised of 55,840 Model 3, 14,470 Model S, and 13,190 Model X.

Since then, Tesla has been exhibiting signs that its production ramp for the Model 3 is going smoothly. This October has seen multiple large batches of VIN registrations this month so far, and the company has also unveiled a new variant of the Model 3 aimed at more budget-conscious reservation holders. Tesla has also announced that its Q3 2018 earnings call will be held this Wednesday, October 24, 2018, at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time). As noted by Citron in its note, the last time Tesla held an earnings call on an October, “revenue beat the consensus by 21%.”

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As of writing, Tesla stock is up 5.85% at $276.22 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Shareholder group urges Nasdaq probe into Elon Musk’s Tesla 2025 CEO Interim Award

The SOC Investment Group represents pension funds tied to more than two million union members, many of whom hold shares in TSLA.

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Credit: xAI/X

An investment group is urging Nasdaq to investigate Tesla (NASDAQ:TSLA) over its recent $29 billion equity award for CEO Elon Musk. 

The SOC Investment Group, which represents pension funds tied to more than two million union members—many of whom hold shares in TSLA—sent a letter to the exchange citing “serious concerns” that the package sidestepped shareholder approval and violated compensation rules.

Concerns over Tesla’s 2025 CEO Interim Award

In its August 19 letter to Nasdaq enforcement chief Erik Wittman, SOC alleged that Tesla’s board improperly granted Musk a “2025 CEO Interim Award” under the company’s 2019 Equity Incentive Plan. That plan, the group noted, explicitly excluded Musk when it was approved by shareholders. SOC argued that the new equity grant effectively expanded the plan to cover Musk, a material change that should have required a shareholder vote under Nasdaq rules.

The $29 billion package was designed to replace Musk’s overturned $56 billion award from 2018, which the Delaware Chancery Court struck down, prompting Tesla to file an appeal to the Delaware Supreme Court. The interim award contains restrictions: Musk must remain in a leadership role until August 2027, and vested shares cannot be sold until 2030, as per a Yahoo Finance report.

Even so, critics such as SOC have argued that the plan does not have of performance targets, calling it a “fog-the-mirror” award. This means that “If you’re around and have enough breath left in you to fog the mirror, you get them,” stated Brian Dunn, the director of the Institute for Comprehension Studies at Cornell University.

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SOC’s Tesla concerns beyond Elon Musk

SOC’s concerns extend beyond the mechanics of Musk’s pay. The group has long questioned the independence of Tesla’s board, opposing the reelection of directors such as Kimbal Musk and James Murdoch. It has also urged regulators to review Tesla’s governance practices, including past proposals to shrink the board. 

SOC has also joined initiatives calling for Tesla to adopt comprehensive labor rights policies, including noninterference with worker organizing and compliance with global labor standards. The investment group has also been involved in webinars and resolutions highlighting the risks related to Tesla’s approach to unions, as well as labor issues across several countries.

Tesla has not yet publicly responded to SOC’s latest letter, nor to requests for comment.

The SOC’s letter can be viewed below.

Nasdaq+Letter Tsla Socig Final by Simon Alvarez

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Investor's Corner

Tesla investors may be in for a big surprise

All signs point toward a strong quarter for Tesla in terms of deliveries. Investors could be in for a surprise.

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(Credit: Tesla)

Tesla investors have plenty of things to be ecstatic about, considering the company’s confidence in autonomy, AI, robotics, cars, and energy. However, many of them may be in for a big surprise as the end of the $7,500 EV tax credit nears. On September 30, it will be gone for good.

This has put some skepticism in the minds of some investors: the lack of a $7,500 discount for buying a clean energy vehicle may deter many people from affording Tesla’s industry-leading EVs.

Tesla warns consumers of huge, time-sensitive change coming soon

The focus on quarterly deliveries, while potentially waning in terms of importance to the future, is still a big indicator of demand, at least as of now. Of course, there are other factors, most of them economic.

The big push to make the most of the final quarter of the EV tax credit is evident, as Tesla is reminding consumers on social media platforms and through email communications that the $7,500 discount will not be here forever. It will be gone sooner rather than later.

It appears the push to maximize sales this quarter before having to assess how much they will be impacted by the tax credit’s removal is working.

Delivery Wait Time Increases

Wait times for Tesla vehicles are increasing due to what appears to be increased demand for the company’s vehicles. Recently, Model Y delivery wait times were increased from 1-3 weeks to 4-6 weeks.

This puts extra pressure on consumers to pull the trigger on an order, as delivery must be completed by the cutoff date of September 30.

Delivery wait times may have gone up due to an increase in demand as consumers push to make a purchase before losing that $7,500 discount.

More People are Ordering

A post on X by notable Tesla influencer Sawyer Merritt anecdotally shows he has been receiving more DMs than normal from people stating that they’re ordering vehicles before the end of the tax credit:

It’s not necessarily a confirmation of more orders, but it could be an indication that things are certainly looking that way.

Why Investors Could Be Surprised

Tesla investors could see some positive movement in stock price following the release of the Q3 delivery report, especially if all signs point to increased demand this quarter.

We reported previously that this could end up being a very strong rebounding quarter for Tesla, with so many people taking advantage of the tax credit.

Whether the delivery figures will be higher than normal remains to be seen. But all indications seem to point to Q3 being a very strong quarter for Tesla.

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Tesla bear Guggenheim sees nearly 50% drop off in stock price in new note

Tesla bear Guggenheim does not see any upside in Robotaxi.

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tesla showroom
Credit: Tesla

Tesla bear Guggenheim is still among the biggest non-believers in the company’s overall mission and its devotion to solving self-driving.

In a new note to investors on Thursday, analyst Ronald Jewsikow reiterated his price target of $175, a nearly 50 percent drop off, with a ‘Sell’ rating, all based on skepticism regarding Tesla’s execution of the Robotaxi platform.

A few days ago, Tesla CEO Elon Musk said the company’s Robotaxi platform would open to the public in September, offering driverless rides to anyone in the Austin area within its geofence, which is roughly 90 square miles large.

Tesla CEO Elon Musk confirms Robotaxi is opening to the public: here’s when

However, Jewsikow’s skepticism regarding this timeline has to do with what’s going on inside of the vehicles. The analyst was willing to give props to Robotaxi, saying that Musk’s estimation of a September public launch would be a “key step” in offering the service to a broader population.

Where Jewsikow’s real issue lies is with Tesla’s lack of transparency on the Safety Monitors, and how bulls are willing to overlook their importance.

Much of this bullish mentality comes from the fact that the Monitors are not sitting in the driver’s seat, and they don’t have anything to do with the overall operation of the vehicle.

Musk also said last month that reducing Safety Monitors could come “in a month or two.”

Instead, they’re just there to make sure everything runs smoothly.

Jewsikow said:

“While safety drivers will remain, and no timeline has been provided for their removal, bulls have been willing to overlook the optics of safety drivers in TSLA vehicles, and we see no reason why that would change now.”

He also commented on Musk’s recent indication that Tesla was working on a 10x parameter count that could help make Full Self-Driving even more accurate. It could be one of the pieces to Tesla solving autonomy.

Jewsikow added:

“Perhaps most importantly for investors bullish on TSLA for the fleet of potential FSD-enabled vehicles today, the 10x higher parameter count will be able to run on the current generation of FSD hardware and inference compute.”

Elon Musk teases crazy new Tesla FSD model: here’s when it’s coming

Tesla shares are down just about 2 percent today, trading at $332.47.

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