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Tesla Stock Gains Dim Einhorn’s Greenlight


Nov. 1 2019, Published 6:40 a.m. ET

Tesla (TSLA) stock’s rise has brought trouble for many short sellers, including David Einhorn’s Greenlight Capital (GLRE). Tesla stock has risen 23% since the company’s earnings release in October. Short sellers lost more than $1 billion in one day as Tesla stock rose.

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Tesla stock: Einhorn demanded Musk’s resignation

In October, Tesla stock’s rise impacted Greenlight’s hedge fund performance. Greenlight’s funds fell 6.3% last month, reports Bloomberg. In comparison, the S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) rose 2.2% and 0.5%, respectively. Greenlight’s October decline also cut its year-to-date gains to 16%. It doesn’t look like Einhorn’s strategy to short Tesla has gone well.

In the third quarter, Tesla posted an adjusted profit of $342 million, whereas Wall Street had forecast a $79 million loss. The company posted losses in the previous two quarters. The electric car manufacturer has been restructuring its operations to turn itself around. Plus, Tesla has been expanding globally, beginning from China. It has set up Gigafactory 3 to produce the Model 3 in the country.

Greenlight Capital co-founder David Einhorn demanded Musk’s resignation in August after Tesla’s solar panels caught fire. Walmart (WMT) took legal action against the company for fires at seven of its stores due to Tesla solar panels. Einhorn said Tesla should immediately inform any residential or commercial building owners of the defective panels.

However, Tesla stayed silent on the fires and recently launched a new solar roof. The company now plans to focus on its solar division after being centered on its Model 3 ramp-up. Musk is optimistic about the solar segment. In the long run, he expects it to grow as big as the company’s electric vehicle business. To learn more, read Can Tesla’s Solar Roof V3 Take Its Stock Even Higher?

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Tesla stock bear David Einhorn

Einhorn has been a Tesla stock bear for some time now. In May, Einhorn criticized Musk on promises made regarding self-driving vehicles. And in April, he attacked Tesla for its safety features. He believed Tesla cars weren’t as safe as luxury cars, pointing out the company’s faulty suspension and safety rules. He said, “The wheels are falling off—literally.”

Musk believed if consumers bought any car other than Tesla, it would “be like owning a horse in three years.” He later also claimed that Tesla cars would be worth $150,000–$250,000 in the next three years. Currently, Tesla’s Standard Model costs just below $40,000. Einhorn rejected Musk’s claims, stating, “That’s a lot of horse—t.”

Additionally, Zoox co-founder Jesse Levinson feels Musk won’t keep his promise of self-driving cars launching in 2020. Tesla plans to launch a fleet of autonomous vehicles next year, but Levinson doubts that will happen as the technology for fully self-driving cars still doesn’t exist. Furthermore, several Tesla owners have recently complained about the cars’ “Smart Summon” feature, which allows the cars to self-drive to you in a parking lot. Therefore, the technology may still need work.

Plus, the road to commercialization for self-driving cars has been slow and painful. Because of increasing cost concerns, Morgan Stanley has lowered Alphabet (GOOGL) (GOOG) self-driving arm Waymo’s valuation by 40%.

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Einhorn likes GM

Quite contrary to his stand on Tesla, Einhorn seems to like General Motors (GM). Greenlight has owned GM stock since 2011. In 2017, Einhorn expected GM stock to surge if the company followed suggestions. He also said, “We believe others recognize that the stock is deeply undervalued and when shareholders grasp the math and the extent of GM’s behavior, they will vote with their wallets.”

Auto stocks in October

Tesla stock rose 31% in October due to its terrific run after its earnings release. Meanwhile, Ferrari (RACE) and Fiat (FCAU) stocks rose 3.9% and 18.3%, respectively. Fiat stock surged on news of a planned merger with Peugeot. The merger comes amid declining sales, changing consumer preferences, evolving technology, and stricter emission rules for the struggling auto industry.

Additionally, GM faced a 40-day United Automobile Workers strike that has cost it $3.8 billion–$4.0 billion this year. However, the company’s third-quarter earnings results were better than expected. GM stock, which was in the red before the company’s earnings release, cut its losses and ended October about 0.9% lower. Ford Motor (F) stock fell 6.2% after the company lowered its year-end earnings guidance.


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