Musk strikes back at short sellers
as a tech revolutionary. Fittingly, his nemesis is a social media swarm, made up largely of anonymous contributors with made-up names and colorful avatars.
Tesla has said there is no mystery to the car-filled lots – they are distribution points for final delivery to customers. As to the empty trailers, a Tesla spokeswoman said “not all our carriers would be in use at all times. Some might be in maintenance.”
The sidewalk spy
Machine Planet belongs to a large and growing network of Tesla skeptics who connect on Twitter through $TslaQ – Tesla’s stock symbol, followed by Q, a stock exchange notation for a company in bankruptcy. Which Tesla, to be clear, is not. What Tesla is, relatively speaking, is heavily shorted: Of its 173 million shares, about 17 percent are held by short sellers.
Pronounced Tesla-Q, the channel has emerged as a crowd-sourced stock research platform. Contributors divide up research duties according to personal interest and ability, with no one in charge.
Some use commercial databases to track Tesla-loaded ships from San Francisco to Europe and China. Some are experts at automotive leasing or convertible bonds. Some repost customer complaints about Tesla quality and service. One contributor, whose Twitter handle is TeslaCharts, assembles collected data to offer graphical representations of Tesla’s own reports and $TslaQ’s findings.
And some do reconnaissance, posting photos and videos of Tesla storage lots, distribution centers, even the company’s Fremont assembly plant as seen from above.
A major aim is to change the mind of Tesla stock bulls and the media. The research helps individual short sellers decide when to move in and out of the stock. But it’s clear from the posts that $TslaQ can be just as vitriolic as Tesla fans are adoring.
“I go out of my way to listen to them because I want to hear the worst things people can come up with about stocks I have a position in,” said Ross Gerber, head of Santa Monica portfolio management firm Gerber Kawasaki, who is impressed by much of $TslaQ’s research.
But he’s been subject to personal attacks from some $TslaQ members, and said too much emotion from the short sellers can degrade some of the solid research they offer up.
“A lot of their premise is emotional,” he said. “They hate Musk. They think he’s a fraud; they think he’s a liar.”
While activist investors have been around for years, the networked nature of this research and publicity campaign is new, said Byoung-Hyoun Hwang, a Cornell University finance professor who’s studied social media’s effect on financial markets. “The diversity of perspectives, not just a diversity of opinions, could be very valuable,” he said.
Most $TslaQ posters try to remain nameless, citing the repercussions faced by some Tesla critics, including death threats to some $TslaQ members and harassment by Musk himself.
On a Hawthorne sidewalk not far from another Musk company, SpaceX, a man raises his iPhone to get a good camera angle.
It’s after dark. Model 3s by the hundreds are parked inside a lit-up three-level parking garage. The cars are covered in dust. According to the man, some have been in there for months.
“I wanted Tesla to make it,” he says as he taps the big red button. “I’m a car guy, man. The Model S was a great car, especially when they came out with the dual motor.”
The man said he works for a short seller who goes by the Twitter handle Latrilife. In return for scouting out and monitoring Tesla delivery centers and storage sites around L.A., he gets $20 an hour.
Such storage practices are “extremely unusual” in the auto industry, said Bill Hampton, a Detroit veteran who runs AutoBeat Daily, an online industry newsletter.
Tesla doesn’t have traditional dealers, whose lots are filled with Fords, Chevys and Hondas awaiting buyers. That could account for some of Tesla’s scattered inventory, he said.
“But cars shouldn’t be sitting in staging lots for that long under any circumstances, unless you have too many cars,” he said.
Tesla declined to discuss the cars in the Hawthorne lot.
Montana Skeptic outed
$TslaQ has no leader, but it does have a hero. His name is Lawrence Fossi, a lawyer and New York money manager who contributed to the Twitter hashtag as well as investor site Seeking Alpha under the moniker Montana Skeptic – until he was exposed by Musk.
According to Fossi, after he was outed on Twitter last July, Musk personally called the small investment office he works for. Musk told his boss he wasn’t happy about the online activity, and threatened to sue Fossi for defamation. (Tesla doesn’t dispute that Musk contacted the company.)
Meanwhile, Tesla’s public relations department sent emails to the media naming Fossi and encouraging reporters to call his boss – phone number included. The communications executive involved declined to discuss that matter.
“I had never before heard from Tesla or Elon Musk to correct anything I wrote,” Fossi said. “I would have been happy to correct anything that was wrong.”
Fossi said he didn’t take the lawsuit threat seriously, “but I couldn’t afford to drag my boss into this.” So he quit writing for Seeking Alpha and deactivated his Twitter account.
Musk “won the first round,” Fossi said. But $TslaQ gained more visibility and followers in the months that followed. The Tesla short thesis, Fossi said, “is getting a lot more coverage than it would have gotten if Musk had kept his big mouth shut, which is apparently beyond his capacity.”
Musk declined to be interviewed for this story. But the $TslaQ phenomenon clearly vexes him. He calls Twitter a “war zone” and regularly attacks short sellers. His taunts sometimes produce a stock price boost.
Starting last May, Musk amped up his battle with the shorts, promising “the short burn of the century” on Twitter. On July 23, four days after Machine Planet posted photos of hundreds of cars parked at a facility outside Stockton, Musk phoned Montana Skeptic’s boss. And on Aug. 7, Musk issued his infamous “420” tweet, in which he claimed he had “funding secured” to take Tesla private at a premium price – $420 a share.
Some short sellers got burned as the stock price immediately rose by nearly 13 percent. But so did bull investors who thought the deal was real. It wasn’t, and by Aug. 20, as reality sank in, Tesla shares were down almost $100 a share, or 25 percent from pretweet levels. The episode landed Musk in deep trouble with the U.S. Securities and Exchange Commission.