While shares of Tesla Inc. (TSLA) have slid on recent headlines surrounding its Chief Executive Officer (CEO) and founder Elon Musk, one short seller makes the case for the stock to decline to a single digit value. In an interview with CNBC, short seller Robert Chapman argued that while Musk's behavior is a problem for the electric vehicle (EV) maker at the business level, fundamentals at Tesla are what's driving his bearish position.
Short Tesla on Inflated Valuation, Not Musk's Judgment
Last week, Tesla plummeted on news that top executives were resigning following Musk's appearance on The Joe Rogan Experience podcast, wherein he discussed topics such as electric airplanes, smoked marijuana and sipped on whiskey. The short seller called the recent Joe Rogan development "a non-development," and "a perpetuation of what we already know about Elon Musk."
(See also: A Bad Week For Tesla Just Got Worse.)
"I actually don't think you should short it on [Musk's] judgment. I think he is a fascinating businessman, probably the most incredible entrepreneur since Edison …. Selling him short, I think, is a mistake," said the short seller. "I think selling short a $50 billion enterprise auto manufacturer that is struggling to create a business model that is sustainably profitable — that, I think, is a great trade."
Chapman is among the bears concerned with Tesla's cash burn and inability to turn a profit. While Musk says that Tesla will be profitable by the end of 2018, the firm burned through roughly $1.8 billion in cash after capital investments in the first two quarters of 2018. Tesla had about $2.2 billion in cash at the end of the June quarter, noted CNBC.
Closing down 6.3% on Friday at $263.24, Tesla stock reflects a 15.5% loss year-to-date (YTD) compared to the S&P 500's 7.4% return over the same period. Shares of the Palo Alto, Calif.-based automaker are up 3.4% in pre-market on Monday on an upbeat report from analysts at Baird citing the firm's long-term competitive advantage after a tour of its Gigafactory.