Teslas price is just too high. I think they will be very successful and become a big, dominant car maker.
But their price only makes sense if they end up being the only car maker left.
That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you.
For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the price, but what I see right now looks like there is many players, old and new, moving in.
I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work.
The statement "Tesla market value is the same as everybody else put together" means either Tesla is expensive or everybody else is cheap or the statement is inaccurate. It's a little bit of all three.
All other car companies are primarily debt financed rather than equity financed. Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for a total enterprise value of $160B.
So Tesla isn't worth as much as all of the companies put together, it's worth about as much as 2 or 3 of the big ones. Which is still a lot.
But all the other car companies are facing an existential threat. Climate change and the EV transition are going to be tough. That has to be depressing their valuations some.
Tesla also has a really good profit margin. If they can keep that up, it goes a long way to justifying their prices. Pretty big if, that one -- the general assumption is that it will go down as they go downmarket to chase volume. Vertical integration might let them keep it up, though. Think of it like Apple -- 20% market share but >80% of the profit.
What I'm saying is that if Toyota or Volkswagen had no debt, a Tesla level profit margin and no overhanging challenge like the transition to EV, they'd have a market cap similar to Tesla's.
That still doesn't justify Tesla's market cap, but it makes it seem less insane.
> I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work.
To be clear, Michael Burry didn't short Tesla, he bought put options, which gives him the right but not the obligation to sell Tesla stock for a certain price, on a certain date.
If the bet works against him, his options expire worthless. This puts an upper limit on his losses.
If you have an actual short position, your potential losses are unlimited.
All three technologies are really key parts of the future, and controlling that aspect of the suburban home energy profile have absolutely huge synergies.
As we get to higher penetration of renewables, our grid will change from the current model of supplying whatever power is demanded, to a far more two way mode where excess supply will drive time-shifted demand.
Right now the only monetization strategy on the grid for solar/storage providers are 1) net-metered solar, and 2) backup electricity for outages. This will change.
The most expensive component of an EV is the battery, and it's likely we will have as much grid-attached non-EV storage as we have EV storage.
IMHO the current price is unhinged from any analysis, and fully in the tulip bulb stage of share pricing. But I think that Tesla is better positioned to take advantage of three core technologies of our energy future, three techs that must be tightly coupled, and no other player is even really thinking of that.
I'm not one to typically paraphrase billionaires, or think they're too connected to reality... but something I heard Mark Cuban say the other day was kind of "oh, shit that's true" moment for me. It was something to the affect of (I can't find the clip at the moment), "Back in 2010 we never thought we'd see a company hit $1 trillion. We never thought Apple or Amazon (et. al) would be able to continue their growth year after year to even be those $2 trillion dollar companies..." All I could think was "oh shit, yeah, I never thought I'd see it either."
Ten years ago, Apple was worth $297 billion dollars, today it's worth $2.1 trillion dollars. I think Tesla stands a good a chance to be worth these seemingly absurd valuations. The market price isn't solely defined by the current value. With tech companies especially, it reflects expected value, and Tesla still has a lot of room to grow. I'd be more skeptical but EVs are eventually going to cost way less to make than typical ICE (internal combustion engine) cars, and per unit that savings translates into a lot of fucking profit. Not to mention the additional profit they're raking in thanks to the public's image of Tesla's and the experience generally being "magical" (even if gimmicky). Also, a "green crypto" if a Tesla branded play (I feel musk is bringing this soon) will cause a pretty gigantic boost to the company's bottom line.
For at least the next 2-5 years Tesla is gonna be pretty safe, and I'd guess that 2-5 will buy it like 3-5 more years just being the incumbent... I don't think Burry is going to be to happy on this one. Mark Spiegel has already fallen to the beast, and I suspect Burry is likely going to as well.
The world needs enormous amounts of stationary storage to transition to zero carbon electrical generation, and nuclear ain’t happening. Tesla sells batteries in lots of products, some with better margins than others.
The only new reveal is the dollar figure. Burry has been very openly (and vocally) short on Tesla for a while now. He has been Tweeting a bunch about it since September last year. Tesla shares are up ~75% since those original Tweets.
"The market can remain irrational longer than you can remain solvent" applies to both amateur traders and the most seasoned investor/genius alike.
Possibly worth noting that Burry is not the only Big Short figure to openly opine that Tesla's pricing seems way out of whack compared to its fundamentals. Steve Eisman (aka Mark Baum in the movie) was publicly short Tesla for a bit. I think he ended up closing out and losing money at some point with a rueful "It's very hard to short a stock that's a cult."
It's possible both of them are wrong and Tesla has fundamental value at a level they were unable to analyze. Or it's possible that Tesla's future will be determined by things beyond fundamental value. But it's also possible they're right on some timeline.
Oh you're completely missing the nuisance of what we just learned.
Sure, he's been talking short since September, but the size of his position has grown considerably since then - almost certainly timing the S&P inclusion (sorry index investors, you quite literally paid the top price for a stock that has lost almost 45% since you bought it).
He's almost certainly made a killing with his position and the beauty is we don't even know what it is today. He could have realized hundreds of millions in gains, or he could have them all still open.
If he has the position from the filings - just today, when Tesla is down $22 - he has made over $16 million dollars in unrealized gains.
It will be hilarious watching the Musk Zealots crying to have Elon tweet something to fraudulently try to pump the stock price and try to trigger a squeeze. Meanwhile they don't realize he's doing this with options, not shorting directly.
Tesla can grow and sell tons of cars and the stock price might still fall.
Cisco Systems is a great example of a fantastically profitable business with a stock price that's still below peak. It's an incredibly successful company that makes more than $10 billion in profit every year. The stock price is still below the March 2000 peak.
If Tesla "only" made $20 billion in profit a year, the market would probably consider it a failure. Expectations are high.
I can see the bull case for Tesla becoming a multi-trillion dollar company or the bear case. Hard to assess Burry's position without knowing the expiration date and strike price of his puts.
I was curious and looked it up- Cisco is indeed still off of its peak stock price $52 vs $77 in 3/2000... But if you reinvested their dividends you would be a little closer! Just don't adjust for inflation!
$10k invested on 1/2000 would have peaked at $14k in March, and now would be worth $9.5k
Some interesting parallels with automotive industry here. Cisco saw huge valuation base on a perceived future. Nortel (who were more of an incumbent) also saw massive stock price increases at that time. Only one of these two companies survived. Cisco had the right tech but Nortel had fundamentally the wrong tech. I suspect we'll see something similar in the automotive industry.
>Hard to assess Burry's position without knowing the expiration date and strike price of his puts.
Even if you knew the exact pieces of paper that he held today, that would tell you nothing about his overall plan. Very few options strategies involve a one-time purchase of contracts in hopes that the dates & prices on those will hold until conclusion. For something this big, you would continue to acquire (and sell) contracts at a range of strike prices & expiration dates until the overall play is concluded.
I find the title misleading. Unless I misunderstand, Michael Burry has not actually put $530M of his money at risk. He's made a much smaller, leveraged bet. $530M is just the notional value.
So how would you go about making an educated reverse engineering claim on the stake at risk without knowing his other legs nor expiry dates? Is it even possible? How about a wide range?
Can someone ELI5 how this works to those of us who only buy and sell things? I've looked up the definitions, but I'm curious about the purposes and practical risk/reward scenarios of this particular sort of bet.
It sounds like the short thesis is centered around Tesla’s revenue coming in large part from regulatory credits.
If you take out credits and crypto, they look like most other car manufacturers, struggling to make a profit.
> As more automakers produce battery electric vehicles of their own, ostensibly fewer will need to purchase environmental regulatory credits from Tesla, which they have done in order to become compliant with environmental regulations.
> In the fourth quarter of 2020, Tesla’s $270 million in net income was enabled by its sale of $401 million in regulatory credits to other automakers.
Except...the traditional automakers are not struggling to make profit. Not even close. VW Group made $10B last year, during a pandemic year. Toyota $19B. FCA, with their public image of "also ran", $7B. BMW made $4.5B just last quarter.
Even minor automakers like Suzuki or Kia still make multiples of Tesla's profit without breaking a sweat
Tesla ins't "struggling to make a profit". It never made it. Other than artificially imposed government credits, Tesla business is not and have never been sustainable. Maybe someday people will start to see Musk for the carnival barker that he really is.
I'm having a hard time with this one since from the article it doesn't seem like Burry is seeing anything that isn't very well discussed/analyzed already regarding Tesla. Short sellers have gotten very burned in the past in gambles like this, but they've also sometimes made money. Given how historically irrational the market has been about Tesla, this just seems like a gamble rather than the well-reasoned short position based on deep (and unpopular) analysis that his subprime mortgage play was.
Tesla has already achieved its objective: To bring about the electric car revolution. Its secondary objective of pushing the self-driving car revolution has done so-so. How Tesla performs going forward is more of a nice-to-have, but otherwise irrelevant since the ball is now rolling and not in danger of stopping anymore.
The remaining pieces now are solar generation on building surfaces, battery tech, smart grids to route the energy efficiently, cheap space travel, cheap tunneling, and maybe hyperloop if no one picks it up.
This might be Elon Musk's objective, not Tesla's (whatever that means, as that will be a different thing if you ask it to one of its board members, to a sales person, to a developer, etc).
Michael Burry shorted the mortgage backed securities market before most other short sellers. He even suffered from redemptions of his fund and had to disallow them to stop the hemorrhage. Let’s see if his timing is closer to the downwards inflection point now. The market seems super frothy now and I am wary of calling the moment of the inevitable downward spiral. Seen this movie many times before. Just always called it too early (which means you lose). I think being a momentum trader is very hard and requires nerves of steel.
This guy has been wrong a lot recently. Admittedly, he was right once and in a big way. However, remember that success is mostly luck, and this is orders of magnitude truer for success in public markets.
Outside of entertainment, it isn't worth the time to follow celebrity investors.
Tesla is just too many things to reliably short it though. AI company, car company, transportation company, energy storage/solar company.
For example, even amid ongoing China defamation efforts, 4680 battery production 'postponed', updated S and X still being tweaked, upcoming V9 FSD beta release could make the stock blow up again as it did around V8.
The article starts out with bullet points, the third bullet point is this:
"Burry previously mentioned in a tweet, that Tesla’s reliance on regulatory credits to generate profits is also an impediment to the company’s long-term prospects"
When the Tesla stock price is tied ostensibly to some ephemeral aspect of Elon Musk, who gets his lulz from wreaking havoc on cryptocoin markets, does that kind of analysis really matter? I guess it doesn't until maybe, possibly, eventually it does?
He plays classic, shorting overpriced, buying under-priced by raw books. You can get surprise on reality benders like Steve Jobs, Elon Musk or bitcoin.
Betting against Elom Musk seems like betting from first principles against first principles guy. Popcorn and watch.
Not sure Burry priced in TSLA's cryptocurrency play, which (imo) was a giant volatility hedge that will help them make their numbers, and also, oddly, an inventory liquidity hedge that could be used to bludgeon shorts trading on sales data.
Burry is probably right about the market for electric cars and TSLA's exposure to raw materials prices and china, but he's wrong about the strategic ability of its leadership.
Also related, since we are talking about Michael Burry (alias Cassandra on twitter), besides the subprime mortgage shorting in 08, another interesting bet he made was with GME (gamestop) against the shortsellers.
To clarify, Burry was long on GME, I think his bet was done in January, and ended it late december, so very likely more than 5x returns.
I wonder if due to the increase in retail trading activity, stocks are becoming less and less tethered to fundamentals. Retail people buy stocks in companies they like, and that they see as the future, regardless of whether the pricing "makes sense" or not according to traditional metrics.
I have a feeling stocks had little to do with fundamentals for pretty much as long as you were able to make more money trading them than from dividends.
Eventually somebody on Wall Street is going to figure out that Tesla’s business is batteries, that Tesla’s batteries are getting good enough to compete with natural gas peaker plants, and that there is a massive effort underway to convert our electric grid away from burning fossil fuels.
nb: According to the article, $530m is the notional value of his puts, not the premium he paid. 8k contracts is a fairly substantial trade on a $566 stock, but it's not as sensational as the headline makes it sound.
So how would you go about making an educated reverse engineering claim on the stake at risk without knowing his other legs nor expiry dates? Is it even possible? How about a wide range?
> Besides his “Big Short,” Burry made a killing from a long GameStop position recently as the Reddit favorite made Wall Street history with its massive short squeeze.
Except I remember reading that he sold for before the price exploded [1]. So although he made a profit, he missed out on the squeeze because he sold too early.
[+] [-] turbinerneiter|4 years ago|reply
But their price only makes sense if they end up being the only car maker left.
That's not realistic. Building an electric car is not that hard, especially if Tesla already did all the hard lifting for you.
For a while I was thinking that the battery play - becoming the number 1 battery supplier - will justify the price, but what I see right now looks like there is many players, old and new, moving in.
I won't short them tough, in the end I'm just a dog on the internet and have no clue how stonks work.
[+] [-] bryanlarsen|4 years ago|reply
All other car companies are primarily debt financed rather than equity financed. Ford's market cap is $45B, but because it has $120B in debt which means it is worth $120B to it's bondholders and $45B to stockholders for a total enterprise value of $160B.
So Tesla isn't worth as much as all of the companies put together, it's worth about as much as 2 or 3 of the big ones. Which is still a lot.
But all the other car companies are facing an existential threat. Climate change and the EV transition are going to be tough. That has to be depressing their valuations some.
Tesla also has a really good profit margin. If they can keep that up, it goes a long way to justifying their prices. Pretty big if, that one -- the general assumption is that it will go down as they go downmarket to chase volume. Vertical integration might let them keep it up, though. Think of it like Apple -- 20% market share but >80% of the profit.
What I'm saying is that if Toyota or Volkswagen had no debt, a Tesla level profit margin and no overhanging challenge like the transition to EV, they'd have a market cap similar to Tesla's.
That still doesn't justify Tesla's market cap, but it makes it seem less insane.
[+] [-] incrudible|4 years ago|reply
To be clear, Michael Burry didn't short Tesla, he bought put options, which gives him the right but not the obligation to sell Tesla stock for a certain price, on a certain date.
If the bet works against him, his options expire worthless. This puts an upper limit on his losses.
If you have an actual short position, your potential losses are unlimited.
[+] [-] epistasis|4 years ago|reply
All three technologies are really key parts of the future, and controlling that aspect of the suburban home energy profile have absolutely huge synergies.
As we get to higher penetration of renewables, our grid will change from the current model of supplying whatever power is demanded, to a far more two way mode where excess supply will drive time-shifted demand.
Right now the only monetization strategy on the grid for solar/storage providers are 1) net-metered solar, and 2) backup electricity for outages. This will change.
The most expensive component of an EV is the battery, and it's likely we will have as much grid-attached non-EV storage as we have EV storage.
IMHO the current price is unhinged from any analysis, and fully in the tulip bulb stage of share pricing. But I think that Tesla is better positioned to take advantage of three core technologies of our energy future, three techs that must be tightly coupled, and no other player is even really thinking of that.
[+] [-] rubyn00bie|4 years ago|reply
Ten years ago, Apple was worth $297 billion dollars, today it's worth $2.1 trillion dollars. I think Tesla stands a good a chance to be worth these seemingly absurd valuations. The market price isn't solely defined by the current value. With tech companies especially, it reflects expected value, and Tesla still has a lot of room to grow. I'd be more skeptical but EVs are eventually going to cost way less to make than typical ICE (internal combustion engine) cars, and per unit that savings translates into a lot of fucking profit. Not to mention the additional profit they're raking in thanks to the public's image of Tesla's and the experience generally being "magical" (even if gimmicky). Also, a "green crypto" if a Tesla branded play (I feel musk is bringing this soon) will cause a pretty gigantic boost to the company's bottom line.
For at least the next 2-5 years Tesla is gonna be pretty safe, and I'd guess that 2-5 will buy it like 3-5 more years just being the incumbent... I don't think Burry is going to be to happy on this one. Mark Spiegel has already fallen to the beast, and I suspect Burry is likely going to as well.
shrug just my two cents.
[+] [-] toomuchtodo|4 years ago|reply
[+] [-] paxys|4 years ago|reply
"The market can remain irrational longer than you can remain solvent" applies to both amateur traders and the most seasoned investor/genius alike.
[+] [-] wwweston|4 years ago|reply
It's possible both of them are wrong and Tesla has fundamental value at a level they were unable to analyze. Or it's possible that Tesla's future will be determined by things beyond fundamental value. But it's also possible they're right on some timeline.
[+] [-] eckmLJE|4 years ago|reply
[+] [-] tenpies|4 years ago|reply
Sure, he's been talking short since September, but the size of his position has grown considerably since then - almost certainly timing the S&P inclusion (sorry index investors, you quite literally paid the top price for a stock that has lost almost 45% since you bought it).
He's almost certainly made a killing with his position and the beauty is we don't even know what it is today. He could have realized hundreds of millions in gains, or he could have them all still open.
If he has the position from the filings - just today, when Tesla is down $22 - he has made over $16 million dollars in unrealized gains.
It will be hilarious watching the Musk Zealots crying to have Elon tweet something to fraudulently try to pump the stock price and try to trigger a squeeze. Meanwhile they don't realize he's doing this with options, not shorting directly.
[+] [-] MrPowers|4 years ago|reply
Cisco Systems is a great example of a fantastically profitable business with a stock price that's still below peak. It's an incredibly successful company that makes more than $10 billion in profit every year. The stock price is still below the March 2000 peak.
If Tesla "only" made $20 billion in profit a year, the market would probably consider it a failure. Expectations are high.
I can see the bull case for Tesla becoming a multi-trillion dollar company or the bear case. Hard to assess Burry's position without knowing the expiration date and strike price of his puts.
[+] [-] roland35|4 years ago|reply
$10k invested on 1/2000 would have peaked at $14k in March, and now would be worth $9.5k
[+] [-] felixfurtak|4 years ago|reply
[+] [-] bob1029|4 years ago|reply
Even if you knew the exact pieces of paper that he held today, that would tell you nothing about his overall plan. Very few options strategies involve a one-time purchase of contracts in hopes that the dates & prices on those will hold until conclusion. For something this big, you would continue to acquire (and sell) contracts at a range of strike prices & expiration dates until the overall play is concluded.
[+] [-] jeremydeanlakey|4 years ago|reply
> long puts against 800,100 shares
I find the title misleading. Unless I misunderstand, Michael Burry has not actually put $530M of his money at risk. He's made a much smaller, leveraged bet. $530M is just the notional value.
[+] [-] actinium226|4 years ago|reply
[+] [-] eaenki|4 years ago|reply
[+] [-] 6gvONxR4sf7o|4 years ago|reply
[+] [-] awb|4 years ago|reply
If you take out credits and crypto, they look like most other car manufacturers, struggling to make a profit.
> As more automakers produce battery electric vehicles of their own, ostensibly fewer will need to purchase environmental regulatory credits from Tesla, which they have done in order to become compliant with environmental regulations.
> In the fourth quarter of 2020, Tesla’s $270 million in net income was enabled by its sale of $401 million in regulatory credits to other automakers.
[+] [-] thow-01187|4 years ago|reply
Even minor automakers like Suzuki or Kia still make multiples of Tesla's profit without breaking a sweat
[+] [-] unknown|4 years ago|reply
[deleted]
[+] [-] atatatat|4 years ago|reply
Hopefully not (for Burry), because where are those going?
[+] [-] kikokikokiko|4 years ago|reply
[+] [-] mdorazio|4 years ago|reply
[+] [-] kstenerud|4 years ago|reply
The remaining pieces now are solar generation on building surfaces, battery tech, smart grids to route the energy efficiently, cheap space travel, cheap tunneling, and maybe hyperloop if no one picks it up.
[+] [-] pnt12|4 years ago|reply
[+] [-] 1cvmask|4 years ago|reply
https://www.investopedia.com/trading/introduction-to-momentu...
[+] [-] cosmojg|4 years ago|reply
Outside of entertainment, it isn't worth the time to follow celebrity investors.
[+] [-] selectodude|4 years ago|reply
[+] [-] splithalf|4 years ago|reply
[+] [-] malshe|4 years ago|reply
[+] [-] JacKTrocinskI|4 years ago|reply
[+] [-] antattack|4 years ago|reply
For example, even amid ongoing China defamation efforts, 4680 battery production 'postponed', updated S and X still being tweaked, upcoming V9 FSD beta release could make the stock blow up again as it did around V8.
[+] [-] jbigelow76|4 years ago|reply
"Burry previously mentioned in a tweet, that Tesla’s reliance on regulatory credits to generate profits is also an impediment to the company’s long-term prospects"
When the Tesla stock price is tied ostensibly to some ephemeral aspect of Elon Musk, who gets his lulz from wreaking havoc on cryptocoin markets, does that kind of analysis really matter? I guess it doesn't until maybe, possibly, eventually it does?
[+] [-] mirekrusin|4 years ago|reply
Betting against Elom Musk seems like betting from first principles against first principles guy. Popcorn and watch.
[+] [-] motohagiography|4 years ago|reply
Burry is probably right about the market for electric cars and TSLA's exposure to raw materials prices and china, but he's wrong about the strategic ability of its leadership.
[+] [-] PartiallyTyped|4 years ago|reply
To clarify, Burry was long on GME, I think his bet was done in January, and ended it late december, so very likely more than 5x returns.
[+] [-] gruez|4 years ago|reply
[+] [-] notJim|4 years ago|reply
[+] [-] TeMPOraL|4 years ago|reply
[+] [-] mbgerring|4 years ago|reply
[+] [-] jsnell|4 years ago|reply
[+] [-] mbgerring|4 years ago|reply
[+] [-] jokoon|4 years ago|reply
[+] [-] totalZero|4 years ago|reply
[+] [-] eaenki|4 years ago|reply
[+] [-] patorjk|4 years ago|reply
Except I remember reading that he sold for before the price exploded [1]. So although he made a profit, he missed out on the squeeze because he sold too early.
[1] https://markets.businessinsider.com/news/stocks/big-short-mi...
[+] [-] FinanceAnon|4 years ago|reply
[+] [-] freewilly1040|4 years ago|reply
[+] [-] tim333|4 years ago|reply