Pitting Einhorn's frigidly data-driven and Alpha-focused brain against the Church of Elon that is Tesla is inherently hilarious. Tesla stock is essentially impervious to the company's failures. Neither analysts nor investors hold Elon Musk to his own guidance, Tesla doesn't deliver on anything its promised, the stock doesn't drop, and then Einhorn points his fingers and goes apeshit wondering how this isn't working out as the greatest short position in the history of trading.
See, we've been warning everyone that Tesla should be valued as a religion and not as a car company. You can't look at Tesla's balance sheet and discern meaning anymore than you can consult The Book of Leviticus for mortgage advice. But this has not yet fully dawned on poor, numbers addict David Einhorn. And it is growing clear that his trade against Tesla is entering a dangerous early stage of what we call "Ackmania."
As we've seen play out over an agonizingly long time with Bill Ackman and Herbalife, hedge fund managers can sometimes fall into a dark corner of their own souls where a short position metastasizes into a true hatred, and the stock becomes a reliquary for all that is wrong with not just the market, but the world at large. It is a form of self-harm that saps you of your energy and steals your reputation. It also allows rivals to torture you from afar.
This is Ackmania.
A harbinger symptom of burgeoning Ackmania is when a hedge fund manager stops bitching about how no one else can see what they're seeing and begins using less oblique references to bad corporate behavior. This stage of Ackmania is the most dangerous because it is when a short position turns into a moralist crusade.
David Einhorn's most recent investor letter is out, and his thoughts on Tesla evince early-stage Ackmania. It starts out with a bearish call that feels only vaguely catty:
Tesla (TSLA) had an awful quarter both in its current results and future prospects. In response, its shares fell almost 6%. We believe it deserved much worse. So much went wrong for TSLA in the quarter that it is hard to only provide a brief summary. The main near-term problems are poor demand for its legacy vehicles and manufacturing challenges for the new Model 3. Notably, TSLA dramatically reduced its gross margin assumption for the September quarter and publicly blamed ramp-up costs for the new Model 3 sedan. More quietly, the company used the lower gross margin hurdle to offer incentives and to lower the cost of options on the Model S and Model X vehicles, and even offered significant markdowns on showroom models. Given the depth of the price cuts, we were surprised that demand for the Model S and Model X only improved modestly.
But then, the worm turns and Einhorn's developing Ackmania shows through:
Meanwhile, it is becoming clear that scale manufacturing is actually a skill. While the CEO makes bold claims about TSLA’s superior prowess, continued production shortfalls, defects and product recalls disprove him. TSLA faces competition from established OEMs that have decades of scale manufacturing experience. Some of TSLA’s presumed market lead in areas like autonomous driving may more likely reflect TSLA’s willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage.
It's all there. Bitchy references to Tesla not knowing what it's doing, pretending to forget Elon's name, reminding everyone that there are other -better- car companies, and then the Ackmania pièce de résistance; Tesla is maybe hurting people.
Accusing Tesla of putting dangerous cars on the road is dangerously Ackmaniacal in that it's not even really necessary. Tesla's fundamentals are terrible, it's production plans for the Model 3 are absurd and Elon isn't being subtle in his wagging of the dog to hide Tesla's production woes by suddenly pivoting to saving Puerto Rico's power grid. There is enough here to mine for a short trade, David Einhorn. After all, this is a short position, not an ethical battle to save lives and defend us all from Lord Elon's plan to enslave humanity (that won't start for like 10 years, anyway).
You need to calm the fuck down, David Einhorn.
If you don't, we can tell you how this ends: You're suddenly looking at a much smaller AUM, moving your office to the west side of 13th Avenue, touting your position in Del Taco and trying to stay relevant while Dan Loeb squeezes you harder and harder on TSLA just to watch you squirm.
This is end-stage Ackmania. It is not pretty.
Step into the light, David Einhorn, Tesla is nonsense. But let us hold you in our arms and whisper a warning that "On the road to Ackmania lies only madness."