Tesla Short Sellers Lost $38B in 2020 as Stock Surged
finance.yahoo.com
finance.yahoo.com
TSLA as a stock is a fascinating example of how price discovery can fail in times of irrational exuberance and that, in the short-to-medium term, markets aren't efficient nor rational.
In 2014, I saw the opportunity to short a broader sector of the economy, we wrote up a white paper and identified market targets etc that would correlate with my observed trend. But I did not pull the trigger as I lacked the necessary knowledge to understand and time the trades.
My prediction came true. But sadly I was unable to capitalize on it.
The TSLA situation is similar. It's clear that the valuation has become disconnected from reality. But how do you time the inevitable collapse of the bubble? How do you model something as bizarre as this form of irrational exuberance?
Do you induce it through a Pershing Square/Bill Ackman style campaign? Do you fund research into the flaws of the product, highlight it, and hope to induce the correction? Or, do you use other signals to time the purchase and mechanics of your short?
In other words, what do you do when the world around you has gone insane?
https://www.bloomberg.com/opinion/articles/2020-06-12/if-you...
https://fortune.com/2020/06/17/hertz-stock-suspended-offerin...
Otherwise, Tesla will crash when the whole market crashes. If & when the whole market crashes, the Tesla crash will be a lot bigger than the rest of the market.
I mean the market as a whole did crash back when covid started, and this behavior was not really seen.
If the market crashed for a prolonged period I would expect that to be more difficult to sneak through.
AFAICT, there is no metric by which a green hydrogen powered fuel cell car is superior to a BEV. It's more expensive to buy, at best is 3X as expensive to fuel, is far more inconvenient to fill up (a grand total of 39 stations in the US), lower range (300 miles for current models), and is far less reliable (hydrogen embrittlement).
That's assuming it's powered by green hydrogen (aka, hydrogen created via electrolysis). Grey hydrogen cracked from natural gas is cheaper than green hydrogen, but if you're not going green, why would you get anything other than a gasoline car?
It will be green hydrogen too. I don't think anyone is seriously proposing grey hydrogen as a fuel.
This is physically impossible. Green hydrogen is created from electricity and water and is converted back to electricity and water in a fuel cell. These are both lossy processes.
It should also be pointed out that the lower weight of a fuel cell powertrain allows you to use less energy during operation. So even if fuel cells don't fully match the efficiency of conventional batteries, they can still use less energy on a final basis.
A Toyota Mirai weighs 1848kg. A Tesla Model 3 weighs 1612kg.
The Mirai is overbuilt for what it is. The Hyundai Nexo is 1814-1873 kg despite being an SUV. For reference, the Model Y is 2003 kg.
The motors in the Model 3 are 97% efficient. 90% for the entire system is not a dishonest number
Fuel cells are around 60% efficient today. The system efficiency is probably around 55%. This is a number that will increase as fuel cells get more efficient. I believe the gap will eventually close altogether, or at least shrink greatly.
Advances in photocatalytic water splitting could easily make this a reality.
That said I’m under the impression that progress in battery tech is a lot more active right now, and it’s not really clear that finding an efficient and economical photocatalytic material is very realistic
My point is that there are many other hydrogen generation and storage technologies at various degrees of maturity and viability, and it doesn’t seem productive to write off a potential economical fuel cell system as a physical impossibility.
I do think there are many challenging engineering problems along that path, and I’m not convinced it’s tractable at all, much less likely to outpace advances in battery systems.
I disagree on that last part. Fuel cell is moving at warp speed right now, and batteries are losing ground at a rapid rate. We're seeing fuel cells move into everything from e-bikes to aircraft. If there's any kind of disruptive event here, it will be fuel cells replacing batteries at a much faster rate than expected.
Fuel cell vehicles also use batteries. The fuel cell charges the batteries, and the batteries power electric motors. So it's impossible for a fuel cell vehicle to be more efficient than a battery-electric vehicle.
Not to mention the massive losses generating the hydrogen, during electrolysis and compression.
Those are just assumptions. There's no reason why you can't you reduce them to the point where they are non-factors. It's possible they go away completely, for instance if you use thermochemical production of hydrogen or store hydrogen in metal hydrides.
As I said previously, you don't need to perfectly match batteries on efficiency. If fuel cells get close to batteries, it's enough for them to succeed. The rest can be made up by a combination of lower upfront costs and light weighting.
That said, were I in your shoes, I'd spend a lot of time studying the theses of the shorts that have both profited and been buried by TSLA over the last 5 years. Tesla was savaged by them and endured one highlighted, publicized flaw after another. They are even well known and called into Tesla's quarterly calls, looking for responses they could use against the stock. If you're a player you might be able to get them on the phone and ask what did and didn't work.
I've been long TSLA for 8 years. I can't tell you how many times I've said to my wife, 'we really should sell some now'. I said it at $100, $250, $500, and now $700. We still haven't sold.
It's not rational, but even irrational behavior can have an explanation. 2020 was a hopeless year. Tesla, and it's older brother SpaceX, both engender hope and point to a better future. Maybe people need to buy in as a way to get through this time.
You will still have skin in the game. You can still still keep tabs on new developments. But you will also have a more balanced portfolio.
AMZN's P/S is 4.75, it has climbed sharply, but it has usually hovered between 2 to 3.
https://www.macrotrends.net/stocks/charts/AMZN/amazon/price-...
TSLA's P/S is 25.09. The P/S ration has increased exponentially from a historic low (for the company) of 1.74 to the 25+ territory, https://www.macrotrends.net/stocks/charts/TSLA/tesla/price-s...
Yes short sells lost. Short sellers lost? Probably. But an unknown amount.
He does this during market hours and the stock doubles within two sessions.
He, of course, faces zero consequences for this, even if it turns out to be 100% fraudulent.
Enjoy your bankruptcy.
Perhaps they know something we don’t.
I mean, if internal combustion engines are RAPIDLY outlawed faster than the other manufacturers are able to complete, and those companies go out of business, and Tesla buys them... then Tesla would prove to be massively undervalued. As more and more people put their money on that, it becomes less of an insane possibility and more of a certainty.
I mean, why doesn’t Tesla buy the 2nd, 3rd, 4th, and 5th largest US manufacturers?
Part of the auto market is outside the control of Congress.
Titans have crumbled after bad acquisitions with rocky transitions (AOL/Time Warner being one major tech example)
As far as I can tell we passed that point long ago. Tesla is now valued as if it's going to also take Uber and the taxi market, as well as the trucking industry... In its entirety.
But how would that work? TSLA's valuation is entirely based on the collective 'we', not some secret only Tesla knows.
What you identify as irrational markets might actually be you simply being wrong.
I'm sure you have heard about the dot-com bubble. Do you know what all those companies were doing? E-commerce. In some alternative universe Amazon is Pets.com
Bet on winners
Stop out quickly
"Full self drive" is an obvious lie (and dangerously negligent at that) but Musk continues to not only promise it but literally sell it, and get away with it.
I think one day the chronic lying will catch up with him - but at this rate, it won't be soon.
You are so utterly convinced you are right that you refuse to except there are things going on that are bigger than a simple market analysis.
Society is capable of willing into existence that which it believes needs to exist.
Try driving a Tesla once. Then tell me it shouldn't be worth more than all car companies on Earth combined.
I want electric vehicles to become mainstream and think Tesla is an important driver to that goal. I also have no direct position in their share price.
But to suggest that the cars themselves are transformative experiences is just wrong.
The Model 3 is better in every way. Crisper handling, punchier acceleration, and quiet. The electric part is wondrous: No gas stations. Electricity costs me 1/3 what the same miles on gas would cost.
Maintenance? Literally 2 sets of tires.
The battery? I bought the extended range with 310 miles. Tesla upgraded me, free over the air, to 325 miles after about a year of owning the car. 65,000 miles in and it still holds a charge good for 305 miles.
I find the car itself to be transformative.
GM for example would add about $3k per car to gross margin if they did it the Tesla way.
There's nothing wrong or shady either way, but it does make comparison less straight forward.
But that's not all: Tesla adds regulatory credit sales to their "automotive" gross margin figures.
Yes, that's right, Tesla's "automotive" gross margin isn't just vehicle sales like it is for other car manufacturers. For example, look at Q2 2020 filings. The clean-car credits that they sell to other manufacturers are treated as automotive revenue, and that accounting chicanery is entirely what lets Tesla claim a 20+% gross margin on their vehicles. (The clean-car credits are also what lets Tesla claim to be profitable, though it has yet to make a profit actually selling cars.)
Without treating the sale of clean-car credits as automotive revenue, Tesla's gross margins are at best in line with industry gross margins (and fall below industry margins once you apply automotive GAAP to standardize the financials).
The sale of a vehicle results in a credit that can then also be sold, so why can't that profit be tied to the vehicle?
On the flip side, the company can spend lots on R&D that never makes it way into a vehicle. Why should that then count against the profit from selling a vehicle?
I don't understand your R&D point though. It's perfectly logical either way to include or exclude it. There's nothing wrong with how Tesla does it, and there's nothing wrong with how the rest of the auto industry does it. It just means you can't blindly compare the figures.
Either way, adding the $6.8B to their gross margin number for 2019 would have increased automotive gross margins from about 10% to about 15%. Tesla's 2019 automotive gross margin was 21%. MRQ was 24%.
Yeah, I'm not claiming Tesla has bad margins, just that the figures on the balance sheet aren't apples to apples. 10% vs 21% compared to 15% vs 21% makes a huge difference. It's a 40% gap instead of a 110% gap.
As for the evidence, simply read Tesla's SEC filings. The financial parts, not the marketing fluff.
But Apple is still Apple after Jobs. Hopefully the same is true for Tesla and Musk, and we don't find that out for decades.
The company is very successful, but does it innovate in the same way? Under Jobs, the introduction of the iPod, iPhone, and iPad were all groundbreaking compared to industry norms at the time, not to mention the focus on usability. I'm genuinely curious which innovations compare since those days.
If you wanted to count apples share of the watch industry, not just the swiss watch industry) it would be less than one percent.
It's making a new market and gaining some ground but it's not the 'watch industry killer' that people like to make it out to be.
So I'm not sure how this is relevant.
It would also probably be fair to say that the swiss watch industry was decimated as carrying a phone became ubiquitous.
I think the comparison is relatively apt though. People have one left wrist, and even though the apple watch and a classic watch are different categories. You don't often see people wearing both. So there is competition there for a limited number of wrist slots.
And apple is selling more units than team swiss watch.
Now, if you wanted to have a conversation about total wrist market share, I'd still guess the swiss watch industry is winning. You don't have to buy a new mechanical watch every other year so units moved isn't as apt a comparison.
Smartphones and tablets existed, but consumers didn't buy them in today's numbers until Apple/Android came along.
Today, Apple still delivers the best-in-class experience with their devices. They make measured improvement. AR isn’t to the point where glasses are viable. Foldable displays aren’t to the point where they’re viable in the mass market. When they are, Apple will make a big leap forward and “innovate” again. In the mean time, their innovation is simply to continue delivering the most polished experience possible in the marketplace and they continue doing that.
The M1
https://en.wikipedia.org/wiki/ARM_architecture#Advanced_RISC...
Who is and how do you define that? I'd say in some very important spaces they're leaders, such as performance per watt in the mobile CPU space.
> by 2040 will be viewed as Xerox came to be
If you mean PARC's transition from an innovator to the one trick pony Xerox of today I'd say the difference is Apple keeps delivering high quality products and services in an expansive set of markets - some in so much demand you can't even buy today if you have the money.
Those products are rarely if ever the first to market, but always highly competent and aspirational to own. Their consistency in achieving this approximately a decade after Job's death should be a good indicator that they have a robust research, design and marketing process that will keep them moving.
I'm sure detractors would put their money on marketing being the primary driver, while happily ignoring Apple's achievements in engineering market-leading SOC's.
I don't know what's more amazing about this comment, the ignorance from not understanding their core competitiveness or the arrogance to predict something with regard to the tech industry in the year 2040.
Maybe he has some arrangement where the shares are held in trust, and voting power lies with some trusted lieutenant like Gwynne Shotwell?
I'd hope so — central control over the SpaceX vision has been absolutely critical over the past decade, and needs to stay that way until Starships are landing on Mars, if his vision of Mars settlement has any hope of happening.
Afaik spouses come first, then children, then parents, then siblings, on and out.
But I’m honestly wondering if the comments are generated by some version of GPT.
- quote comment - interesting comment —- contrary point to interesting comment —— second level contrary point to contrary point ——- N contrary point - citation point - downvoted nonsense - empathic point - cynical point —- anti-cynical point ——- anti-anti-cynical point - useless but none the less necessary bookend quote comment
Everything makes sense if you have enough information. If something doesn't make sense that means you don't have enough information.
dotcom bubble valuations ca. 2000 were "right"?
Your claim seems obviously wrong except in the tautological sense that the "right" valuation is whatever the market says it is.