Photo: Michele Limina/Bloomberg

Longtime Tesla critic Carson Block admitted that his bets against the company did not pay off. Block said he underestimated Elon Musk's ability to raise huge sums of capital.

Muddy Waters Capital's CEO Carson Block has been a longtime critic of Tesla and its CEO Elon Musk. However, his multi-year bets against the company did not pay off, forcing him to admit his mistake. Block sent clients its first letter to shareholders since the inception of the hedge fund in 2015, which DealBook received from a source familiar with the fund.

In the letter, Block admitted that his personal dislike for Elon Musk had grown into dislike for Tesla, but he clearly underestimated the ability of the head of the company. “The market cap, the luster, the élan of Elon, is still there,” Block wrote, in explaining why his bets against Tesla have gone away. “Tesla shorts have focused on Tesla’s lack of scale to compete in EVs with GM, Ford, VW, etc.,” he wrote. “They are correct in that lack of scale would have been the death of Tesla. But they were looking at the wrong scale. Tesla is here not because it has scale in terms of manufacturing base or unit sales. It has scale because of its capital base,” Block said of Tesla’s $700 billion market cap.

In the note, Block's tone remained rude and irreverent. He repeatedly uses profanity, which only emphasizes his lack of professionalism. However, accepting mistake is not an easy step. Thanks to the fact that Tesla has repeatedly proven its ability to quickly and confidently develop, and Musk has established himself as a person ideally suited for the CEO role, many long-time critics of the company have already changed their minds.

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Article edited by @SmokeyShorts, you can follow him on Twitter

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