Musk strikes back at short sell­ers

The Buffalo News - - BUSI­NESS NEWS -

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.

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