Tesla short-sellers have swung back to the SolarCity side of the business. Here’s why. (TSLA)
After Tesla posted a surprise 3rd-quarter profit, short-sellers found themselves burned as the stock surged past $300.
Tesla’s automotive business is largely based now on its Model 3, a vehicle that endured a fraught birth but has now stabilized.
With Tesla now selling around 250,000 cars a year, a short position based on the car business is busted.
Short-sellers have now pivoted to the weak solar business and have been encouraged by allegations the Tesla merger with SolarCity in 2016 was effectively a bailout of the troubled solar-panel leaser and installer.
Greenlight Capital’s David Einhorn — a Tesla short — highlighted the SolarCity deal in his Q3 investor letter to clients of his hedge fund.
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For years now, Tesla has a been a battleground for short-sellers. At times, they’ve made money; but they’ve also lost money, most recently when Tesla posted a surprise third-quarter profit and the stock rocketed back above $300.
Tesla shares are volatile, but so are short-sellers attention spans. For much of the past two years, their focus was on Tesla’s automotive business, and that made sense. Even today, automotive revenues are the vast majority of Tesla’s topline, at over $14 billion year-to-date, while the energy business has kicked in just over $1 billion.
Through three different vehicle programs: Model S, Model X, and Model 3, Tesla had demonstrated an enviable ability to generate massive buzz and sign up customers. But when it came to actually building and delivering cars, Tesla struggled. The modern auto industry is very much about manufacturing processes, but Tesla didn’t want to follow any leaders. CEO Elon Musk’s ego got in the way of smooth execution on this front.
Short-sellers smelled blood and moved in, knowing that the cash-intensive nature of the car business would weigh on …read more
Source:: Business Insider