Suspicions about Tesla’s “short selling”: frustration, collective hallucinations and undercurrents

On an ordinary afternoon in 2007, a Wall Street private equity fund manager received an unusual phone call: someone told him that at the headquarters of Goldman Sachs, a "weirdo" was buying large amounts of stocks. Credit default swaps to hedge the U.S. mortgage system.

This "big mistake" that made bank bond traders laugh from ear to ear was spread as a joke throughout half of Wall Street, but it did not make the boss laugh out loud. After hanging up the phone, he immediately assigned staff to start an in-depth investigation of the U.S. mortgage credit system. A week later, he bet almost all of his money and also purchased a large amount of credit default insurance against U.S. mortgages.

Steve Eisman himself (right) and the actor Steve Carell who played him in "The Big Short"

This man's name is Steve Eisman. Ten years later, the experiences he and several other "weirdos" experienced this year were made into the movie "The Big Short", which won multiple nominations for the Academy Awards that year.

The content of this movie is based on the true story of the 2008 financial crisis. It tells the story of several madmen in the eyes of Wall Street who successfully shorted the U.S. economy during the financial tsunami that swept the world. He made tens of billions of dollars and became one of the few winners among 7 billion people.

This is the undisputed pinnacle moment in the history of hedge funds, and it is also the compass for countless investors to risk their lives and enter the "short selling" business. Steve Eisman, the prototype of the head of the private equity fund, is now revered as a god-level figure in the short-selling field and is still active on the front lines of the short-selling market.

After successfully shorting the U.S. economy, his next target is Elon Musk and his Tesla.

“Value Destroyer”

Elon Musk is furious.

Although this business genius has always had a bad temper, when faced with the "hungry wolves" who shorted Tesla, he still did not hesitate to use harsh language to cynicize him in public again and again. Not only did he describe short sellers as "value destroyers," but even the U.S. Securities and Exchange Commission (SEC), a platform institution, could not escape the fate of being bombarded by him: "This is a committee that feeds short sellers, ( Short selling) should be illegal!”

Although it sounds ugly, Musk’s anger is not unreasonable. As a company that has been listed for less than ten years, Tesla has experienced more bloodshed than ever before. Most of their predecessors on the Nasdaq exchange were more violent. Data shows that in February this year, Tesla successfully "defeated" Apple and became the most shorted U.S. stock by Wall Street shorts.

Who is shorting Tesla? At the known level of this issue, the list of teams shorting Tesla is a collection of elite talents from all walks of life. Among them are many top Wall Street elites like Steve Eisman, as well as many accountants, lawyers and even former presidential candidates. What worries Musk most is that there are also many people who have resigned from Tesla in this team. of former employees.

Like those Tesla enthusiasts, Tesla short sellers are determined to short the stock and follow the principles of "value investing." But the difference is that from their eyes, Tesla is like a huge, colorful soap bubble.

Kynikos Associates Founder and President Jim Chanos

“Tesla is a car company, it’s a high-end company, but it’s still a car company and its profit margins As low as any other automaker," said Jim Chanos, founder and president of Kynikos Associates.

In the field of shorting Tesla, Chanos can be regarded as one of the leaders, and he is the most rational group of people who pay attention to Tesla's stock price. In his view, although Tesla has begun to make profits, the source of its profits is still not the actual sales of products, but tax credits.

“Investors are investing in Elon Musk as a person, not the Tesla behind him.” In Chanos’ view, this means that Tesla’s own market value “has no value whatsoever” ”, because aside from the halo brought by Musk, it is just a car company that has not yet established itself and achieved stable profitability.

Tesla founder and chairman Elon Musk

In addition, Chanos and many veteran Wall Street financial people who are used to doing things rigorously have negative opinions on Musk and Tesla. The style of conduct is also criticized: "We believe that Tesla and Mr. Musk's understanding of 'facts' is too 'broad'. Tesla has issued many announcements...and many of these announcements are contrary to the facts. ”

Hard Waiting and “Collective Illusion”

Being short Tesla is not easy. Sometimes, it is even harder than shorting the United States. In the movie "The Big Shot", Steve and others experienced a difficult wait of more than a year before the U.S. housing market really collapsed. It's like the opening time of a roulette wheel has been forcibly extended ten thousand times. During this year, every day is a huge mental torture for the short sellers.

For those short sellers who focus on Tesla, the time and pressure required to short the United States is much less.

Although they firmly believe that Tesla’s value bubble will eventually burst, those who stand on their opposite side are more fanatics who do not play by the rules of value. "When a stock is not bound by valuation because it has some dynamic growth aspects and has a 'cult'-like effect, it is necessary to leave it."

After saying this After speaking, Steve Eisman's short selling of Tesla came to an end. This was a disastrous experience, which made the Wall Street giant who didn't know what madness almost said angrily the word "cult".

For more people who are still insisting, their belief in shorting Tesla has gradually evolved into a "collective hallucination": they cannot believe in the models and loopholes they have carefully calculated. None of them can stop Tesla from running wild. The stock price that is not based on value has caused them to lose more than 9 billion US dollars and become a failure in the eyes of their peers.

But more people still insist that this is just a process of bubble expansion. "In fact, Tesla's U.S. revenue for the full year of 2019 was 14.9% lower than in 2018. No one would have guessed this looking at the stock price chart of Tesla stock." Market analysis Teacher Jim Collins said.

In a sense, the leading short sellers have become more in-depth about Tesla's research, which also gives them more support for their beliefs. But in the hearts of more short-sellers, the expectation for Tesla's value to collapse has turned into a "collective hallucination" that cannot be turned back. "I can only sleep if I believe Tesla will collapse soon," one short seller said.

Another kind of fanaticism

Perhaps what Tesla’s determined short sellers don’t realize is that their own obsessions are different from those of Tesla’s fanatical followers. They are the same, they are just two different directions of one body. Being firmly bullish or bearish in itself is a behavior that goes against the laws of the market. Only by following the trend can you reap the rewards.

In this bet surrounding Tesla, the smartest people may still be hiding in the shadows.

Recently, data from financial institution S3 Partners showed that between February 24 and March 3, the scale of short selling in the market increased by nearly 15 billion U.S. dollars, which brought the scale of short selling in U.S. domestic stocks to 8,480 billion, and its profits have exceeded US$50 billion. And this number continues to grow after several circuit breakers in the U.S. stock market.

Since February 24, the stock that short-selling investors have made the most is Tesla. S3 Partners pointed out that in these seven trading days, as Tesla's stock price plummeted 17%, short-selling investors who bet that Tesla's stock price would fall reaped US$1.1 billion in profits.

When the short sellers finally ushered in the carnival moment, Musk showed unusual calmness about the victory of this group of "value destroyers". On his beloved Twitter, when faced with sharp questions from fans about "How do you feel about Tesla's stock price plummeting?" Musk did not hold back his anger as usual, but said very rationally, neutrally and objectively: Tesla's share price did get a little high some time ago, so it "should be corrected."

Does Musk really think $800 Tesla is “too high”?

As the most staunch advocate of Tesla’s value, if it turns out that as value investor Nader said: “All Tesla fans are crazy,” then Musk will definitely go to them. $800 will not be the highest point Musk expected. After all, even under the current situation, Wall Street securities analysts have priced Tesla's stock price at a high price of $1,300.

Therefore, behind Musk’s calmness may lie the key to winning in Tesla’s gamble.

A few days ago, news came out that dozens of Saudi princes were using their funds to short-sell crude oil futures and obtained a large amount of income from it, which was enough to make up for the losses from selling crude oil at low prices. . "If there is a bookmaker in the crude oil futures market, then this position must be the Saudi Crown Prince."

Musk, standing at the center of the Tesla storm, can feel it better than all fans and short sellers. The bells and whistles of change. If this unconventional madman is allowed to make his own choice, will he find a new way to make money without harming the development of the company itself?

“Tesla’s stock price has become so incredible that we think even Musk himself will short Tesla. This has nothing to do with technology, (Tesla) has become Wall Street’s new casino.” This view from Citron Research a few months ago may be more worthy of careful consideration at this time.

This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.