Roy Philipose, Investor from Philadelphia. I have a passion for finance and knowledge for "picking stocks."

I use a combination of fundamental analysis, common business sense, capitalist vision, and real world experience to pick stocks. I follow the investment advice of Peter Lynch and Warren Buffett. Currently, I work in the financial services field. I have been investing on a part-time basis for 20+ years, since 1997.

- Last updated Oct 2018.

February 27, 2014

You Bet Against Elon Musk, "Super Genius", And Lost! Twice!

(This was supposed to be my 2nd article attempt on Seeking Alpha, but was rejected. Why read the same kind of articles, over and over again?)

Today, I would like to talk about those who shorted Tesla Motors and SolarCity. Here is some background on the companies.
As you know, Tesla Motors makes premium electric cars and SolarCity is a solar electric supplier. Elon Musk is a major shareholder of both companies, with Musk being Ceo/Chairman of Tesla and Chairman of Solarcity.
Tesla went public at $17 in June 2010 and Solarcity went public at $8 in Dec 2012. Both companies at the time were considered to be overvalued and thought to be future failures, especially Tesla. So naturally short-sellers (investors who bet against the stock) bought in short. There were of course people who believed in what there were doing and bought in long (myself included, though I bought in at later prices and traded the stocks).
The companies went public, continued to progress (with some problems), and continued to grow. With each quarter passing, it was obvious the companies would not fail. Yet the short sellers continued to bet against the stock, primarily due to "gross valuation."
Tesla eventually came down from its peak of $194 to $120, but quickly climbed back (thanks to short sellers and positives) to $194 the day before Q4 earnings. Again, both companies report positive news and the stocks continue to accelerate higher. On my blog postings, I recommended Tesla at $35 and SolarCity at $16. Last I checked, Tesla was at $253 and Solarcity $84.
There were many opportunities for the short sellers to cover your bet, especially against Tesla. On April 1, 2013, an announcement was made by Elon that Tesla would be profitable. (Peter Lynch said, "Wait till the story improves.") At that point the stock opened at $42. That day was also a good day to "Buy", as the uncertainty was much lower. On Oct 11, 2013, SolarCity announced "double volume" of megawatts installation. The stock was at $47. Again, you had chances to cover, but didn't. Elon gave warnings too.
The shorts have been winning the battles, but losing the war. I am not sure why they continue to bet against these companies. My observation is that "You short something that has no value." These companies had "some value" in the beginning and now they continue to have even "more value."
For too long, many shorts and longs listened to critic, John Petersen. I know, a few times, he shook me out of my early Tesla long positions. He is a smart guy, but Elon is smarter and has proven that. One saying I have is, "Be careful of the know-it-alls who don't have-it-all." Academics are known for that.
Both SolarCity and Tesla are "publicly traded startups." Normal "fundamental analysis" valuation was difficult to apply here. But should be able to do, at a later date. (This part was a concern to SA, so I corrected it.)
Now to my main point; you bet against a "Super Genius." The only way you are going to win that bet is that you are a "super genius" yourself. And I guarantee that no one who shorted was a "SG". That is right, not one. Maybe a few geniuses and that is it. You shorted twice and now got burned twice. I would highly recommend to the "shorts", that you leave both companies alone and exit your positions. A fellow "SG" is giving you this advice. "We eventually learn from our repeated mistakes" and I hope that you will too.
Again, I will continue to partner with Elon Musk. The current stock valuations seem high, but there is still plenty of growth available. Even if the stock prices come down, I will continue to partner with Elon. I have learned my lesson from that. We need energy and we need transport. Solarcity will be providing the energy and Tesla will be providing the transport. Their valuations will continue to increase and the stock prices will eventually reflect that (Warren Buffett).

Disclosure: Long on TSLA, SCTY.  

(Update 8/14) Elon Musk is not a super genius.