Comment: Fraser Perring bets against Tesla – others have already failed


The share of the electric car pioneer has risen by more than 1200 percent within two years.

(Photo: dpa)

Next, please! Fraser Perring bets the share of the electric car maker Tesla on falling prices. It goes “short”, as it is called in the stock market jargon.

Others have tried that before – and lost a lot of money in the process: Last year, according to financial data provider S3 Partners, shortsellers lost around ten billion dollars with their bets, and in 2020 shortsellers even lost around 40 billion dollars.

With Perring, a particularly prominent shortseller is now trying its luck. He was one of the first to question the business model of the now insolvent payment service provider Wirecard. This gives him a certain degree of market power, as shown in his last bets against S&T and Adler.

However, there is one crucial difference: Perring suspected fraud at Wirecard. On the other hand, he does not accuse Tesla of not actually producing any cars. He thinks the electric car pioneer is simply overrated.

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There are good reasons for this assessment. Tesla only delivered around 900,000 cars last year, but is valued at more than a trillion dollars on the stock market – that’s more than a million dollars per car delivered. But this is not a new phenomenon. Even so, the stock has risen by more than 1200 percent in two years. To put it bluntly, the stock has developed a remarkable resistance to common sense.

The Tesla community’s belief in Musk makes shorting difficult

This is made possible by the growth story told by Tesla boss Elon Musk. Tesla shareholders firmly believe the company will keep growing – and that makes it so difficult to short the stock. Because for short speculation to be successful, two things usually have to be fulfilled: On the one hand, the share has to have risen significantly, so investors have to be ready to realize profits. On the other hand, the company must have problems with corporate governance.

The Tesla share has increased significantly, but many shareholders have held their shares since the times when the company was still on the verge of bankruptcy. They are sitting on book profits so high that they have no reason to take profits as long as Musk sticks to his growth fantasies.

Of course, that doesn’t mean the stock can’t go down anyway. Strong fluctuations are the order of the day with the Tesla course. It’s just that they are unpredictable and make “controlled” shorting of the stock so difficult. The recalls of almost 700,000 vehicles due to deficiencies that may pose a risk to safety are completely ignored on the stock exchange, for example.

In this respect, Perring’s short bet is a visit to the casino that is not recommended for imitation. Other star investors also lost money in the process. Mike Burry, for example, who once successfully bet against the housing market, shorted Tesla last spring. In the meantime he has quietly finished his bet.

More: After Tesla’s price jump – Why the e-car builder polarizes investors and analysts

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