FREE GROUND SHIPPING

0

Your Cart is Empty

by Claribelle Deveza November 05, 2019

Tesla (NASDAQ:TSLA) short hedge-fund managers Adam Capital has surrendered their bear position due to the electric car maker's strong Q3 earnings results. The Brazilian hedge-fund is the latest burn victim in Elon Musk's short burn of the century, which he predicted back in May 2018. 

Adam Capital announced their bearish defeat via a monthly letter to clients, reported Bloomberg. The firm decided to end its short position because the Elon Musk-led company was operating more efficiently, challenging the hedge fund's investment thesis.

Since Tesla's Q3 earnings results were released, TSLA shorts have garnered $1.36 billion in mark-to-market losses, said Ihor Dusaniwsky from S3 Partners to Bloomberg. TSLA shorts had made more than $2 billion in mark-to-market gains before Q3, and lost almost 70 percent of it after Tesla's third-quarter results were released. 

Elon Musk predicted this outcome in a May 2018 tweet, when he warned shorts that the burn of the century would be coming. As always, though, Musk was a little delayed on his delivery, but the long wait may have been satisfying for TSLA bulls. 

As longtime TSLA Bull Ron Baron said: "[Elon Musk] always delivers. He doesn't deliver on time. He always delivers, just not on time, so far."

Since the Q3 earnings call, the most resilient of bears have tried to generate the narrative that Tesla's current gross margins are not sustainable. However, TSLA bulls have pushed back, arguing Tesla's growing efficiency will only help the company's gross margins increase over time. 

Adam Capital seems to have gained a bullish perspective on the matter based on the fact that it cited Tesla's efficiency as the reason for ending its short position. ARK Invest analysts Sam Korus and Tasha Keeney, as well as the company's CEO and Founder, Cathie Wood, explained how Tesla's growing efficiency bodes well for the company's future through Wright's Law. 

The law reveals a correlation between efficiency and a decrease in the price of production. Using Wright's Law, Korus and Keeney confidently predicted a 30 percent gross margin for Tesla by the end of 2020 for the Model 3. 

A significant turning point for Tesla was the GA4 at Fremont, which established an efficient assembly line for the company. Gigafactory 3 in China seems to be adopting the GA4's format and may prove to be Tesla's most efficient factory to date. With that in mind, the shorts may want to buy some salve for yet another incoming burn this fourth quarter.


Leave a comment

Comments will be approved before showing up.


Also in Tesmanian Blog

SpaceX Crew Dragon: SuperDraco engines successful test fire
SpaceX Crew Dragon: SuperDraco engines successful test fire

by Evelyn Arevalo November 13, 2019

Today, teams at Cape Canaveral Air Force Station, Landing Zone 1, successfully test fired a Crew Dragon capsule's abort engines. An important milestone for the company ahead of the actual in-flight abort mission.
Read More
The Boring Company will start digging in Las Vegas
The Boring Company will start digging in Las Vegas

by Evelyn Arevalo November 13, 2019

The Las Vegas Convention announced Elon Musk wants to break ground (literally) The Boring Company will begin digging to build an underground Loop transportation system by the end of November.
Read More
Tesla Supercharger in Kazakhstan
Tesla Supercharger in Kazakhstan

by Eva Fox November 13, 2019

In July, a team from Tesla arrived in Kazakhstan to explore new markets for developing a network of charging stations, opening service centers, and possibly points of sale in the future.
Read More