• Elon Musk has hinted at a $420/share go-private offer for Tesla, which would mark the end of an era for Tesla stock.

  • We show how short arguments have evolved since 2013 from the lack of appeal of electric vehicles, to the structurally-unprofitable nature of the business model and potential demand weakness owed to impending competition from incumbents.

  • With those arguments proved false in Q2 2018 and evidence for booming Model 3 demand, it was time to move to a more constructive short thesis structured around valuation.

  • But the relentless distortion of facts by under-the-water short interests and the click-seeking media, and Elon Musk’s inability to remain isolated, have compelled the CEO to take Tesla private.

  • We show that Tesla has been compounding capital at some 10% since we went long in 2013, and arguably in excess of 20% after proper accounting for expansion of the intangible asset base.

  • To You, Tesla (TSLA) Short,

    From day 1, you committed to the believe that Tesla was bound to fail, that Elon Musk was a fraud. A self-confident startup guy from Silicon Valley with an engineering mindset decided to disrupt the cutthroat automotive industry with silent, battery-powered, electric cars? Oh, please.

    Short thesis I

    So you proclaimed that electric vehicles would never be more than a niche toy for the environmentally-conscious wealthy, even when all physical and economical trends suggested the inevitable shift towards electric transportation.

    When Tesla announced the Gigafactory, you said that in the unlikely event of a shift to electric transportation, it would be fuel cells, not Li-ion batteries, that would become the mainstream storage technology.

    Short thesis II

    After Dieselgate, with all major automotive groups announcing a strategic shift towards battery-powered electric vehicles, your claims became untenable. So you shifted the script towards Tesla business model being structurally unprofitable, and you felt comforted.

    You have spent the last 3 years grasping at straws in Tesla’s financial statements, interpreting quarterly volatility as irrefutable evidence of fraud while ignoring consistent 50%+ top-line growth.

    You’ve also obsessed on Tesla’s demand-strength being the result of lack of electric vehicle alternatives from the incumbent automakers. If Tesla could not make profits without EV competition, how could it when the likes of BMW, Mercedes or Lexus offered comparable products?

    Of course, you missed entirely the point that a car is a car regardless of the nature of the power-train and that Tesla has been capturing market share from formidable competitors from day 1. Before an electric BMW 3er can challenge the Tesla Model 3, it will need to be able to challenge itself by offering better value than its gasoline counterpart, a milestone that should not be taken for granted given that the strength of BMW resides in ICE power-trains.

    Committed as you were to your flawed investment thesis, digging deeper and deeper into your hole of mounting financial and reputation losses, the most daring among you went as far as to portray Tesla as a giant Ponzi scheme. Because of course, if Elon Musk’s grand purpose in life was to fool naive investors, what quicker way than disrupting the rocket launch industry with high-tech low-cost reusable rockets, and the road transportation industry with electric, software-rich, Internet connected vehicles displayed in company owned boutiques around the world? Setting up an obscure financial or multi-level marketing scheme would have been too much trouble.

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