Comment by clomond | Hacker News Reader

Comment by clomond | Hacker News Reader

And the thread of the sweater gets pulled...

While not shocking given the previous track record of Trevor's previous enterprises - the most likely outcome here is that it will get very, very ugly. He also already 'cashed out' millions of dollars to buy a 32.5 million dollar ranch - one of the largest residential properties in Utah's history. [1]

Tesla's run up and general optimism around EVs seems to have triggered a gold rush of sorts, effecting other EV pureplays' stock prices (ex. NIO) regardless of progress and actual state of the technology.

While in theory I am in strong support of new financing models to bring new technologies to market(ex. these Special Purpose Acquisition Companies - SPACs) I am very concerned that if even a portion of the alleged is true, this could poison this financing route for legitimate businesses and the sector overall. A camp in the investment industry even think Tesla is a fraud, and this would only harm the narrative and long term mission of Tesla.

It would have been great if they actually took the money, utilized it with a plan and executed on the plan to help with electrification - the premise for which I think many retail investors have become involved.

Even if there was no fraud, I was always skeptical of their plan (smelled like vaporware to me) and their adamance about hydrogen as an energy storage medium without sufficient discussion on electrolyzer technology or how those unit economics work always struck me as big red flags. Seems like Nikola's plan was to combine a bunch of off the shelf parts existing from other sources into a product, in that case - where is the technology? So much of it with just the bit of digging and what I hear about it has made me skeptical.

Probably best to stay as far away as possible and see where the chips fall. I do wish them the best though, assuming there was no fraud.

[1] https://www.latimes.com/business/real-estate/story/2019-11-1...

>A camp in the investment industry even think Tesla is a fraud,

At this point in Tesla's history, how is it a fraud? It is manufacturing and selling cars. It is building batteries. I can see where some may think it is not living up to the hype/promise of returns, but they are actually making and selling product. Yet people are still claiming fraud?

There are a lot of short sellers who lost money who were desperate for any reason for Tesla stock to fall.

This is an incredibly unfair characterization about how short sellers think and operate.

Why is there this attitude that short positions are somehow less moral than long positions? I really don't get it.

I think it's because short sellers are seen as pessimists -- on some level, you're betting for a business to fail (or perform poorly), and regardless of whether or not you're right, that means you're betting on people losing jobs, dreams going up in smoke, etc. etc.

I don't subscribe to this narrative, but it's an easy one to spin when your stock is the one being short sold.

Because sometimes the shorts do some shady things.. https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...

People holding long positions do shady stuff all the time as well. I don't see the distinction.

Please share some examples. I'd like to understand so I can compare to the things in that link.

Theranos comes to mind

Theranos was a shady company. But it wasn't a public company. The shadiness was the company itself.

Were the people being shady not also stock holders doing shady things to keep the stock price up?

I think there is a difference in the company itself being shady and investors being shady to influence the stock price. The long pump and dumpers definitely fall into the latter category and similar to the shorts described in my link.

Enron? Years of blatant fraud and earnings manipulation with the explicit goal of hitting stock price targets.

Was that the company itself or were there outsiders contributing to this too?

Pump-and-dumps are an entire class of fraud that fundamentally relies on you being long.

This is totally right and just as shady

Because, to simplify, shorts are hoping for people to fail, while longs are hoping for people to succeed.

What both shorts and longs are hoping for are profits on their investment. I doubt either really cares about businesses/people succeeding or failing.

If you promise a bunch of long holders that a particular short trade is guaranteed to make profit, would they not take it out of concern for people?

It's not inherent to the shirt position but some short sellers definitely influence media.

Couldn't agree more that the sentiment doesn't make sense given what they have actually done, all of their proof, all their products, patents etc. (disclaimer: I'm long TSLA)

I'm just relaying what I have heard and read. Tesla's history is far from perfect. I think the target of issue has been their various claims and promises on 'self-driving' and their autonomous vehicle programs. Also, some possible issues surrounding the acquisition/merger of SolarCity.

And while the shorts around Tesla aren't making much noise right now given all the momentum, it wasn't all that long ago that there were some loud short sellers alleging about various accounting frauds. Some quick 'internet research' here will dig up various allegations and statements from the 'haters'.

More common at issue is that many traditional auto analysts' existing equity valuation models for auto companies 'break' when you plug in the numbers for Tesla - making it impossible to come to a 'reasonable' valuation they are comfortable buying at (as these are people investing other people's money need to be able to point to something that justifies the purchase if it goes south).

If they are losing money doing those things it isn't really much of a business.

They do appear to be generating income from operations these days, but the size of the operation has increased so fast that it is hard to analyze.

They've actually been showing profits recently.

But even if they weren't, there's a lot of daylight between unprofitable and fraudulent!

All "profits" come from regulatory credits. Even then, there's plenty of aggressive accounting going on. It's arguable Tesla has never been profitable and still isn't.

I'm sure the S&P 500 committee took note, they decided not to include TSLA in the index, which I am thankful for.

I think this is a fundamental misunderstanding of what short sellers do (which is where most of the "fraud" accusation comes from). Some short sellers DO claim fraudulent behavior, e.g. Enron was famously predicted to be fraudulent by Jim Chanos.

However short selling at its core just involves the belief that a company is overvalued. In the case of extreme fraud, the "correct value" is $0. In most cases, the short seller just believes it's some amount less than the current share price (but above $0).

Tesla falls into the latter category. I'm sure some do claim fraudulent behavior, but Tesla is an interesting case because Tesla's PE is ~200 IIRC, compared to the 20 average for the automotive industry. For comparison, Amazon's PE is 120.

So if you think Tesla is ultimately a car company, or even just a "regular" tech company, it's not insane to think that it's incredibly overvalued. That doesn't mean you think it's a fraud, of course, but the subtlety obviously gets lost by many (and short sellers often make grandiose edicts that don't help their case).

> Tesla's PE is ~200 IIRC

TSLAs PE is 896 as of market close today (371.74/.4140) and had a PE of ~1213 at its ATH price of 502.49/share

Yikes, I haven’t kept up with it much clearly.

But yeah, there’s a valid non-malicious reason to believe Tesla is overvalued.

thank you for putting up this correction

There is literally no company on the planet that can justify a 896 PE

Let's see how long Tesla can keep things going with 1,000 PEs

They are projected (based on stock valuation) to take over all or most of

cars energy solar power

Which is quite an absurd assumption

Plenty of companies have justified negative P/E, which is worse than 896, and still worse than even 10,000. In fact, their share price kept going up all the way until their P/E was strongly positive.

Musk has said he thinks that Tesla's stock is overvalued, and the company has sold stock to raise funds.

Musk may hate them, but there's is little-to-no daylight between him and the short sellers at this point; both think Tesla's stock is currently overvalues and are selling it to cash in on the current high valuations. :)

Musk said "Tesla stock price is too high imo". This was a clue that the 1:5 stock split was coming.

Where did he ever say Tesla was overvalued?

> While in theory I am in strong support of new financing models to bring new technologies to market(ex. these Special Purpose Acquisition Companies - SPACs) I am very concerned that if even a portion of the alleged is true, this could poison this financing route for legitimate businesses and the sector overall.

SPACs have been around for a long time, and they've always had a bad reputation, often used for various forms of fraud and penny stock scams. Going live via a SPAC is opaque and expensive; you'd never choose it unless the normal IPO path seemed too risky for some reason, probably because you might not be able to survive the transparency the process requires.

If Nikola is just a complete fraud, that wouldn't taint SPACs so much as it would confirm their existing reputation.

Combining existing off the shelf components into a novel design is a legitimate way to build an innovative product. The first Tesla Roadster was exactly that, all car companies had access to the technology but they dismissed it as a gimmick, who would buy a street car powered by lawn mower tech.

Reply on news.ycombinator.com