← Back to context

Comment by dylan604

4 years ago

>A camp in the investment industry even think Tesla is a fraud,

At this point in Tesla's history, how is it a fraud? It is manufacturing and selling cars. It is building batteries. I can see where some may think it is not living up to the hype/promise of returns, but they are actually making and selling product. Yet people are still claiming fraud?

31 comments

dylan604

Reply
wgerard  4 years ago

I think this is a fundamental misunderstanding of what short sellers do (which is where most of the "fraud" accusation comes from). Some short sellers DO claim fraudulent behavior, e.g. Enron was famously predicted to be fraudulent by Jim Chanos.

However short selling at its core just involves the belief that a company is overvalued. In the case of extreme fraud, the "correct value" is $0. In most cases, the short seller just believes it's some amount less than the current share price (but above $0).

Tesla falls into the latter category. I'm sure some do claim fraudulent behavior, but Tesla is an interesting case because Tesla's PE is ~200 IIRC, compared to the 20 average for the automotive industry. For comparison, Amazon's PE is 120.

So if you think Tesla is ultimately a car company, or even just a "regular" tech company, it's not insane to think that it's incredibly overvalued. That doesn't mean you think it's a fraud, of course, but the subtlety obviously gets lost by many (and short sellers often make grandiose edicts that don't help their case).

  • quickthrowman  4 years ago

    > Tesla's PE is ~200 IIRC

    TSLAs PE is 896 as of market close today (371.74/.4140) and had a PE of ~1213 at its ATH price of 502.49/share

    • wgerard  4 years ago

      Yikes, I haven’t kept up with it much clearly.

      But yeah, there’s a valid non-malicious reason to believe Tesla is overvalued.

    • switch11  4 years ago

      thank you for putting up this correction

      There is literally no company on the planet that can justify a 896 PE

      Let's see how long Tesla can keep things going with 1,000 PEs

      They are projected (based on stock valuation) to take over all or most of

      cars energy solar power

      Which is quite an absurd assumption

      1 reply →

  • Lazare  4 years ago

    Musk has said he thinks that Tesla's stock is overvalued, and the company has sold stock to raise funds.

    Musk may hate them, but there's is little-to-no daylight between him and the short sellers at this point; both think Tesla's stock is currently overvalues and are selling it to cash in on the current high valuations. :)

    • ALurchyBeast  4 years ago

      Musk said "Tesla stock price is too high imo". This was a clue that the 1:5 stock split was coming.

      Where did he ever say Tesla was overvalued?

maxerickson  4 years ago

If they are losing money doing those things it isn't really much of a business.

They do appear to be generating income from operations these days, but the size of the operation has increased so fast that it is hard to analyze.

  • CydeWeys  4 years ago

    They've actually been showing profits recently.

    But even if they weren't, there's a lot of daylight between unprofitable and fraudulent!

  • Hypx  4 years ago

    All "profits" come from regulatory credits. Even then, there's plenty of aggressive accounting going on. It's arguable Tesla has never been profitable and still isn't.

    • buttcoinslol  4 years ago

      I'm sure the S&P 500 committee took note, they decided not to include TSLA in the index, which I am thankful for.

clomond  4 years ago

Couldn't agree more that the sentiment doesn't make sense given what they have actually done, all of their proof, all their products, patents etc. (disclaimer: I'm long TSLA)

I'm just relaying what I have heard and read. Tesla's history is far from perfect. I think the target of issue has been their various claims and promises on 'self-driving' and their autonomous vehicle programs. Also, some possible issues surrounding the acquisition/merger of SolarCity.

And while the shorts around Tesla aren't making much noise right now given all the momentum, it wasn't all that long ago that there were some loud short sellers alleging about various accounting frauds. Some quick 'internet research' here will dig up various allegations and statements from the 'haters'.

More common at issue is that many traditional auto analysts' existing equity valuation models for auto companies 'break' when you plug in the numbers for Tesla - making it impossible to come to a 'reasonable' valuation they are comfortable buying at (as these are people investing other people's money need to be able to point to something that justifies the purchase if it goes south).

LegitShady  4 years ago

There are a lot of short sellers who lost money who were desperate for any reason for Tesla stock to fall.