Einhorn Assails Tesla, Saying Carmaker's Woes Echo Lehman's (2)
2018-10-05 18:07:39.691 GMT
By Simone Foxman
(Bloomberg) -- David Einhorn, a prominent critic of Tesla
Inc., bashed the electric-car maker, saying its woes resemble
those of Lehman Brothers Holdings Inc. before the bank failed.
“Like Lehman, we think the deception is about to catch up
to TSLA,” Greenlight Capital said in a quarterly letter Friday
seen by Bloomberg. “Elon Musk’s erratic behavior suggests that
he sees it the same way.”
Einhorn, who rose to prominence with his wager against
Lehman, pointed to parallels by saying the bank “threatened
short sellers, refused to raise capital (it even bought back
stock), and management publicly suggested it would go private”
in the months leading up to its collapse.
The Greenlight letter argues that Musk thought he could
lower the cost of producing the Tesla Model 3 -- long billed
with a starting price of $35,000 -- by cutting manufacturing
expenses and automating its factories.
But he said Tesla’s costs ended up exceeding expectations,
leading the company to charge much higher prices. This
predicament, Einhorn believes, has been the source of the Tesla
CEO’s “erratic behavior.” Customers are unhappy because the car
is more expensive than what Musk promoted when taking their
deposits, Einhorn said.
“He can’t make the car without losing too much money and he
can’t bring himself to cancel the program and refund everyone’s
deposits,” Einhorn wrote.
Elon Musk
@elonmusk
@ivanovi_ivaylo With production, 1st you need achieve
target rate & then smooth out flow to achieve target cost.
Shipping min cost Model 3 right away wd cause Tesla to lose
money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla &
live.
Sent via Twitter for iPhone.
View original tweet.
The upshot: Musk is trying to get himself fired, Einhorn
said. “Quitting isn’t an option because it prevents Mr. Musk
from claiming he could have fixed the problem if he stayed.”
Short sellers like Einhorn have been a long-running target
of Musk’s ire, and the feud continued on Thursday after he
mocked the U.S. Securities Exchange Commission as the
“Shortseller Enrichment Commission.” The CEO sent the tweet just
days after settling a fraud lawsuit with the agency over his
questionable tweets claiming to have the funding and investor
support secured to take Tesla private.
Read more on Musk’s recent Tweet storm
Musk and a Tesla representative didn’t respond to a request
for comment. The CEO has insisted that the company won’t need to
raise capital, citing his expectation that higher output of
Model 3 sedans will generate profit and positive cash flow in
the third and fourth quarters.
In his letter Friday, Einhorn said his short position on
Tesla was his second-biggest winner in the third quarter.
But this year is shaping up to be Greenlight’s worst ever.
Its main fund has lost 26 percent through September.
As critical as Musk has been of shorts, he and Einhorn have
engaged in some playful banter recently. After the hedge fund
manager wrote in a letter to clients months ago that he was
happy that his lease on a Tesla had ended, citing problems with
its touch screen and power windows, Musk responded on Twitter.
Elon Musk
@elonmusk
@tictoc Tragic. Will send Einhorn a box of short shorts to
comfort him through this difficult time.
Sent via Twitter for iPhone.
View original tweet.
Read more: Einhorn thanks Musk after receiving a box of
shorts
Einhorn said in his letter that after a two-day offsite
review of the firm’s positions last month, he and his team think
they have a “deep understanding" of their portfolio. Some
changes were made, but Greenlight is mostly sticking with their
ideas.
“Most of our company theses are intact,” the letter said.
Read more about Einhorn’s fund here
Outlining his firm’s other holdings, Einhorn said the firm
exited Apple Inc. in the third quarter at $228 a share after
first buying it in 2010. It made more than $1 billion on its
position, the letter said.
Einhorn said Greenlight’s efforts helped move Apple to
aggressively repurchase stock, driving up earnings-per-share.
But the manager sold his position, saying the company’s
valuation is now less enticing and he has concerns about the
U.S. trade war with China, where iPhones are assembled.
The firm is “somewhat worried about Chinese retaliation
against America’s trade policies,” the letter said.
Other highlights from the letter:
* The biggest winner during the quarter was Brighthouse
Financial Inc., which announced a share buyback during the
quarter.
* Greenlight added a position in Altice USA Inc., which should
benefit from rebuilding its network with fiber in the next few
years.
* The firm exited Micron Technology Inc. when his team sensed
that DRAM prices could fall.
* Regulatory risks around social media companies caused the
hedge fund to exit its stake in Twitter Inc. after a 78 percent
gain in eight months.
* Greenlight’s largest disclosed long positions at the end of
the third quarter were AerCap Holdings NV, Brighthouse, General
Motors Co., Green Brick Partners Inc. and gold.
--With assistance from Joshua Fineman.
To contact the reporter on this story:
Simone Foxman in New York at sfoxman4@bloomberg.net
To contact the editors responsible for this story:
Margaret Collins at mcollins45@bloomberg.net
Alan Mirabella, Josh Friedman
2018-10-05 18:07:39.691 GMT
By Simone Foxman
(Bloomberg) -- David Einhorn, a prominent critic of Tesla
Inc., bashed the electric-car maker, saying its woes resemble
those of Lehman Brothers Holdings Inc. before the bank failed.
“Like Lehman, we think the deception is about to catch up
to TSLA,” Greenlight Capital said in a quarterly letter Friday
seen by Bloomberg. “Elon Musk’s erratic behavior suggests that
he sees it the same way.”
Einhorn, who rose to prominence with his wager against
Lehman, pointed to parallels by saying the bank “threatened
short sellers, refused to raise capital (it even bought back
stock), and management publicly suggested it would go private”
in the months leading up to its collapse.
The Greenlight letter argues that Musk thought he could
lower the cost of producing the Tesla Model 3 -- long billed
with a starting price of $35,000 -- by cutting manufacturing
expenses and automating its factories.
But he said Tesla’s costs ended up exceeding expectations,
leading the company to charge much higher prices. This
predicament, Einhorn believes, has been the source of the Tesla
CEO’s “erratic behavior.” Customers are unhappy because the car
is more expensive than what Musk promoted when taking their
deposits, Einhorn said.
“He can’t make the car without losing too much money and he
can’t bring himself to cancel the program and refund everyone’s
deposits,” Einhorn wrote.
Elon Musk
@elonmusk
@ivanovi_ivaylo With production, 1st you need achieve
target rate & then smooth out flow to achieve target cost.
Shipping min cost Model 3 right away wd cause Tesla to lose
money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla &
live.
Sent via Twitter for iPhone.
View original tweet.
The upshot: Musk is trying to get himself fired, Einhorn
said. “Quitting isn’t an option because it prevents Mr. Musk
from claiming he could have fixed the problem if he stayed.”
Short sellers like Einhorn have been a long-running target
of Musk’s ire, and the feud continued on Thursday after he
mocked the U.S. Securities Exchange Commission as the
“Shortseller Enrichment Commission.” The CEO sent the tweet just
days after settling a fraud lawsuit with the agency over his
questionable tweets claiming to have the funding and investor
support secured to take Tesla private.
Read more on Musk’s recent Tweet storm
Musk and a Tesla representative didn’t respond to a request
for comment. The CEO has insisted that the company won’t need to
raise capital, citing his expectation that higher output of
Model 3 sedans will generate profit and positive cash flow in
the third and fourth quarters.
In his letter Friday, Einhorn said his short position on
Tesla was his second-biggest winner in the third quarter.
But this year is shaping up to be Greenlight’s worst ever.
Its main fund has lost 26 percent through September.
As critical as Musk has been of shorts, he and Einhorn have
engaged in some playful banter recently. After the hedge fund
manager wrote in a letter to clients months ago that he was
happy that his lease on a Tesla had ended, citing problems with
its touch screen and power windows, Musk responded on Twitter.
Elon Musk
@elonmusk
@tictoc Tragic. Will send Einhorn a box of short shorts to
comfort him through this difficult time.
Sent via Twitter for iPhone.
View original tweet.
Read more: Einhorn thanks Musk after receiving a box of
shorts
Einhorn said in his letter that after a two-day offsite
review of the firm’s positions last month, he and his team think
they have a “deep understanding" of their portfolio. Some
changes were made, but Greenlight is mostly sticking with their
ideas.
“Most of our company theses are intact,” the letter said.
Read more about Einhorn’s fund here
Outlining his firm’s other holdings, Einhorn said the firm
exited Apple Inc. in the third quarter at $228 a share after
first buying it in 2010. It made more than $1 billion on its
position, the letter said.
Einhorn said Greenlight’s efforts helped move Apple to
aggressively repurchase stock, driving up earnings-per-share.
But the manager sold his position, saying the company’s
valuation is now less enticing and he has concerns about the
U.S. trade war with China, where iPhones are assembled.
The firm is “somewhat worried about Chinese retaliation
against America’s trade policies,” the letter said.
Other highlights from the letter:
* The biggest winner during the quarter was Brighthouse
Financial Inc., which announced a share buyback during the
quarter.
* Greenlight added a position in Altice USA Inc., which should
benefit from rebuilding its network with fiber in the next few
years.
* The firm exited Micron Technology Inc. when his team sensed
that DRAM prices could fall.
* Regulatory risks around social media companies caused the
hedge fund to exit its stake in Twitter Inc. after a 78 percent
gain in eight months.
* Greenlight’s largest disclosed long positions at the end of
the third quarter were AerCap Holdings NV, Brighthouse, General
Motors Co., Green Brick Partners Inc. and gold.
--With assistance from Joshua Fineman.
To contact the reporter on this story:
Simone Foxman in New York at sfoxman4@bloomberg.net
To contact the editors responsible for this story:
Margaret Collins at mcollins45@bloomberg.net
Alan Mirabella, Josh Friedman