Thread by @IvarKreugerMusk

For a long time, the biggest criticism against a TSLA short position has been:

A) It’s dumb because it hasn’t worked, and

B) It hasn’t worked because Elon can continue to pull rabbits and well why would you bet against Elon?

The reasons why it has been a poor short are not necessarily reasons why it will continue to be a poor short. There are many reasons to think otherwise.

But first, let’s go back to historical precedents.

Most recent is VRX. When VRX stated they would no longer be acquisitive, there was a narrative change. It went from a “growth” story where investors were willing to look past the leverage profile & aggressive accounting, to

A “show me” story that revolved around sustainable profitability and cash flow profile. What Elon has done into Q3-Q4 is promise profitability and cash flow. That’s a narrative change from the growth story.

Also, ask yourself why he hasn’t been pushing new concepts, models, the truck, etc. It could be because he can’t (legal reasons) or simply the lies of M3 production caught up. The “nobody believes in me” syndrome.

It’s well known that TSLA is a “cult” stock of different forms. There’s the “EV is good for the environment” crowd, the “I worship Elon” crowd, the “First mover advantage” crowd, the “past success only means TSLA will succeed” crowd, I’m sure there are others.

The problem with having the cults mentioned above is, you have to constantly work and maintain that image. Further, the Republican donations, calling a hero a pedo, making products that put the consumers lives in danger, those are all psychologically damaging to the cults.

Aubrey McClendon promised an energy future dependent on natural gas, he was a pioneer, had a leveraged company & pledged his equity for margin loans to make additional investments in energy. Then sold in Oct ‘08:

mobile.nytimes.com/2008/10/14/bus…

He not only leveraged CHK balance sheet, but leveraged his own CHK shares. The amount of stress and energy it takes and consumes when you’re “Texas Hedged” can cause unfathomable outcomes.

Back to VRX, Pearson had many cult, the “he’s a different pharma dude”, “he’s a hard worker”, “he knows the industry better than anyone” and so on. So much of Pearsons success was dependent on VRX stock price. The higher the stock price, the more acquisitive VRX could be, and

The higher the stock price, the more Pearson could borrow personally. Until he couldn’t. Once VRX narrative broke, not only did the leverage profile of VRX become a concern, but it also led to Pearson liquidation of VRX stock.

google.com/amp/s/www.wsj.…

Don’t also forget, Pearson left for a period of time due to health reasons. Again, when you’re THE face of a cult stock, the amount of company and personal leverage can cause stress and brings in a psychological cloud.

So much great work has been put out on the cars, production issues, EPA concerns, financial statements, but one also needs to think about historical precedents of cult stocks that are leveraged and the face of the company has pledged their equity.

Back to why although TSLA has been a poor short in the past, why the path forward, might be different.

1. TSLA in the past had access to capital markets in debt and equity. That seems to be constrained.

2. TSLA had a history of building cars without issues, this has changed with the M3.

3. Elon was always a little crazy, but now he’s crazy and sensitive. When you’re successful, being crazy is worded as “eccentric” which in Wall St. and with investors, has a positive image (don’t ask me why). But when you’re crazy and less successful, you’re just crazy.

4. In Top Gun, Stinger tells Maverick, “Son, your ego is writing checks your body can’t cash”.

Stinger would tell Elon, “Son, your ego is promising shit your company can’t deliver.”

5. Since TSLA became a public company up to most recently, it was the only game in town from a product standpoint. That’s no longer the case.

6. Credit matters, for a long time, TSLA didn’t really have to worry about debt downgrades and leverage profile, that’s no longer the case.

7. Elon’s wealth is dependent on an outcome that requires near perfect execution. Over time, Elon has borrowed more and more by pledging more TSLA, that’s an increase in risk, unlike before.

8. The longer you’ve been around, the more people have a history of your execution. We all know the issues here.

9. Elon is under more and more stress to show why others are wrong and he’s right. That’s not healthy for the company or himself.

10. Did I mention “Production Hell?”

Basically the reasons why TSLA has been a poor short in the past have turned to why it may be a good short going forward.