Tesla shares rocketed on 23rd October after short-seller, and long-term critic Citron Research changed its opinion on the electric auto company, an opinion that had been held for almost two years. Tesla’s share has been rising ever since. In a research note released last week by Andrew Left, Head of Citron, the long- time short-seller of Tesla’s shares changed his view to “long”.
In the dramatic “U-turn” view, Citron Research described Tesla as an electric company that is destroying its completion. The research note went ahead to state that the company appears to be unchallenged in the electric car market. It then gave a long recommendation since Tesla’s Model 3 has became a hit and most warning signs that plagued the electric company in the past have proven to be insignificant.
In a nutshell, Tesla is destroying its competitors. According to Citron Research, TSLA isn’t just stealing Mercedes and BMW customers but Honda and Toyota customers as well. The electric company has succeeded in its mission to legitimately disrupt the auto industry. According to Citron’s research findings, Tesla model 3 car sales have skyrocketed surpassing all traditional top luxury cars in America. Citron’s research note also pointed out a rather obvious but important fact – Tesla is the only car company that actually produces and sells electric cars.
While addressing sentiments from critics who would argue Tesla has been/is catering for a 2-year backlog in demand, the research note highlighted that demand for Tesla’s electric cars is new and increasing further. Tesla is getting the demand directly from its competitors as seen in its car reservation figures which stood at 450,000 in June 2017.
Citron’s research findings further state that; car buyers who reserved Tesla cars in 2017 most certainly overlooked other luxury models suggesting demand would fall in demand in 2018 if it was fuelled by backlog. However, this hasn’t been the case which means, people are shifting away from traditional models in favour of Tesla. In a nutshell, demand for Tesla’s electric cars can’t be caused by a backlog since the electric car maker’s sales have been increasing while those of other brands have been declining over the years even in economies considered to be booming.
Following Citron Research’s changed views; Tesla’s shares soared 6% to 277.86. The share has since risen further to a high of $342.
Back in March 2016, Citron Research declared a short position on Tesla for the 1st time. The “change in heart” comes almost two years later after the online investment newsletter became satisfied with Tesla’s resilience in a seemingly difficult car market segment.
When Citron Research first declared Tesla as a short position, Tesla’s price was slashed by 50%. Citron Research’s declaration was attributed to demand and supply problems at the time.
Last month, Mr. Left revealed his plans to sue Tesla. His latest sentiments indicate the current change in heart has no influence on the lawsuit. According to Mr. Left, Tesla’s C.E.O. Elon Musk engineered his currently-abandoned plan to take Tesla private with the intentions of “burning” short-sellers. The claims are on record in a press release by Mr. Left’s lawyer stating that the parties to the lawsuit believe Elon Musk tried to manipulate the value of Tesla’s securities using false and misleading tweets in a direct and deliberate effort to “burn” short-sellers.
In September 2018, Elon Musk settled a US-SEC (Securities & Exchange Commission) lawsuit which saw him pay $20 million. Mr. Musk was accused of making misleading statements after he tweeted about taking Tesla private at £322 or $420 per share. Mr. Musk responded to these charges stating the action were unjustified. He went further and stated his actions were transparent, truthful and in the best interests of investors.
According to the SEC Chairman, Jay Clayton, the matter reaffirmed important principles encompassed in the regulator’s disclosure-based federal securities regulations. Clayton felt that corporate insiders and companies should make statements that are responsible and accurate. The SEC chairman also felt statements such as Elon Musk’s shouldn’t omit information which reasonable investors would consider crucial for making investment decisions.
Tesla is 15+ years old (founded in 2003). The electric car maker’s mission is proving electric cars can be quicker, better and more fun than gasoline cars. The company has produced 300,000+ electric cars to date. Besides producing and selling electric cars, Tesla is also in the business of scalable clean energy generation.