Carson Block, the founder of Muddy Waters, a well-known short-seller, outlined his investment position in his first investor letter since he founded the fund in 2015.One of the most striking is the change in his view of Tesla. The fund manager stated that he no longer short Tesla and “does not intend to resume his short position.”
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In the letter, Bullock also explained in detail what changed his views on Tesla and Musk. He told about a dream he had last week in which a meeting between him and venture capitalist Chamath Palihapitiya was cancelled. Bullock has repeatedly called Palihapitia the “SPAC Jesus” because the investor said on Twitter that his top priority is inequality and climate change. Bullock mocked this as “pseudo-populism.”
Bullock wrote in the letter: “In short, I was waiting for him in my dream, but his assistant came. She told me in an adjutant manner that Chamas would never come to see me. After a few scenes in Los Angeles that didn’t exist, I woke up in horror at 3 in the morning. I got a revelation—a few days later, after sleeping for many hours, I still believe this is true.”
Block said that because of this dream, he realized that in order to decarbonize the economy, interest rates “must be kept at absurdly low levels” to stimulate investment in decarbonization technologies, which he believes will be the same “in the next few decades”. Bullock also believes that this will also be a “clear policy” for central banks such as the European Central Bank, the Bank of Japan, and the Federal Reserve. Despite this, he does not believe that direct government investment in this type of technology is the solution to the problem, but the low interest rate environment bodes well for Tesla.
Bullock added: “As Tesla (without accounting nonsense, subsidies and credits (1.66, 0.01, 0.61%)) has shown, so many necessary investments will be value-damaging. I am not an environmentalist— My home with two drivers proudly has a 30-cylinder internal combustion engine with a total horsepower close to 1,400 horsepower. But to be honest, our lifestyle is not sustainable.”
Although Brock admitted that he had criticized Musk publicly for many years for many reasons, he explained, “I didn’t know Elon Musk until the prophet SPAC Jesus cancelled his visit to me in my dream. “Or at least know him better than before. “
As early as 2013, Brock stated that he would not be short on Musk because he was “too good at making rabbits out of hats.”
Bullock stated that the Tesla bears “have always been right and wrong about Tesla’s problems.” Bullock explained that the bears’ views “are concerned about Tesla’s lack of scale in the field of electric vehicles. , Unable to compete with companies such as General Motors, Ford and Volkswagen.”
“They are right, the lack of scale will lead to Tesla’s death. But they misunderstood the scale,” Bullock added. “Tesla is here not because of its scale of production or sales. It has scale because of its capital base. After all, for someone who can make a damn car drive and a rocket fly. ,This is the most important.”
Bullock said that Tesla’s capital base is so large only because of “years of lies (such as’funding lock-in’) and wars with shorts (we think this is just due to his pathological narcissism) , And trampling on those rules that (Musk) finds inconvenient.” Now, Tesla, with a market capitalization of more than $700 billion, “is far more capitalized than any competitor.”
Brock wrote: “Looking at Tesla’s market value, people might think it is fragile-reality will crush it. However, Tesla should be able to raise billions of dollars before its market value shrinks, and remember , Tesla’s equity financing tends to push up the stock price. (Those’dumb money’ investors actually know that the size of the capital base is always important.)” He added that the size of the capital base only needs “Elon to continue to put his The audience’s acceptance of his nonsense is set to be absurd-if not admired-acceptance.”
Of course, Bullock reiterated that “radical short sellers still have many opportunities.” “Most scammers are too rhetorical to build real cars or rockets.” Block also believes that “there will be a large number of scammers. Come out and use false promises of disruptive technology to defraud people of money.” He mentioned Lordstown Motors, Nikola and XL Fleet, which he shorted.
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