Tesla Stock Rise Burns Einhorn’s Greenlight Capital

The sharp rise in Tesla (TSLA) stock has brought joy to some and pain to others. Tesla bulls such as ARK Invest CEO Catherine Wood would have rejoiced in the stock rally. However, bears such as Greenlight Capital’s David Einhorn would have been punished for their short position in Tesla.

Tesla stock rose by 74% in last year’s fourth quarter, bringing its full-year gain to 26%. The stock has been rallying since the company announced surprise third-quarter profits. Plus, Tesla stock touched new highs early this year, led by record deliveries. The stock has risen by 8% year-to-date.

Tesla stock and David Einhorn’s Greenlight Capital

The run-up in Tesla stock has led to losses for short sellers. According to Bloomberg, Einhorn’s Greenlight fell by 0.3% across its funds in December. Tesla stock would have played a central role in that fall. In 2019, Greenlight rose by 13.8%, underperforming the broader equity market. The S&P 500 (SPY) rose by 29% last year.

According to CNN Business, S3 Partners estimates Tesla short sellers have lost $8.4 billion in the last seven months. In this year’s first two days, shorts have lost about $700 million.

S3 Partners head of predictive analytics Ihor Dusaniwsky said, “Some of short-term shorts have been taken out. But many of the longer-term shorts, they’re sticking with it no matter what the price moves are.”

Einhorn-Musk saga

Einhorn has been a longtime critic of Tesla CEO Elon Musk. Einhorn has criticized Musk on several topics, including car safety, Tesla solar roof fires, and his autonomous vehicle timeline.

Their feud escalated in a recent Twitter war. In Greenlight’s Q3 newsletter, Einhorn attacked Tesla, stating that the company prioritizes positive PR ahead of customer safety. Einhorn wrote, “For now, the accepted reality appears to be that Elon Musk is above the law.”

In reply, Musk claimed Einhorn had to say those things to save face in front of investors after the losses he would have faced following Tesla’s third-quarter earnings release. Musk also invited Einhorn to visit TSLA facilities.

In counter-reply, Einhorn accepted his invitation to tour Tesla factories, beginning with the troubled Buffalo factory that makes solar roofs. He also questioned Tesla on its accounting policies. To learn more, read With Tesla Solar Roof Jibe, Einhorn Hits Hard.

Overall

Although Tesla bears have been hurt with the stock price rise, most have maintained their position. To learn more, read Tesla Stock Bears Are Down but Not Out!

Musk has created a stable growth path for the company. And irrespective of bearish arguments, the company’s recent activities show that it may soon overcome roadblocks and walk on that path.

In 2020, the company’s increased Model 3 output in China should help its volumes. Tesla is smoothly ramping up production in China, applying its learnings from previous ramps-ups. The Model Y rollout from Fremont should further support its overall volume growth. Tesla expects the Model Y to be a wide-margin product, as it will be priced slightly higher than the Model 3. Additionally, with the ramp-up of the model, Tesla expects cost efficiencies to kick in.

Musk has also put in place growth drivers beyond 2020. To learn more, read How Is Tesla Stock Positioned for 2020?