- Renowned market bear Rob Majteles says he was "wrong early" when he shorted Tesla, but says he doesn't believe in the company, or its $600 billion valuation.
- Majteles is betting on a broad-based reassessment of the equity markets, which have hit record highs this month, leaving valuations looking pricey, despite a grim economic backdrop.
- "I might be the only person out there with S&P puts," Majteles said.
- Visit Business Insider's homepage for more stories.
Tesla has always had its fair share of naysayers, but few more so than Rob Majteles, notorious bear and founder of Treehouse Capital.
Majteles, known for his transparency and candor, tweeted this in 2019: "Call me when they file for bankruptcy. Until then, it's just a wearisome and tawdry company."
However, with Tesla dominating headlines this year, its shares up 665.35% and its inclusion this month in the S&P 500, the company has undeniably had a good run, at least from the perspective of its investors.
Majteles closed his short position against Tesla in February, when the share price was about a quarter of the $640 it is worth now. He told the Wall Street Journal at the time it was the biggest set of losses he had racked up in 20 years.
"I was wrong early about shorting Tesla – lost money on it," Majteles said in an interview with Business Insider this week, but added he still doesn't "believe in the company or its valuation."
Elon Musk, Tesla's founder and CEO, has taunted those who bet against his company in the past. He most recently trolled short-sellers by selling red 'short shorts', which ultimately crashed the company's website.
Investors betting against Tesla have lost more than $39 billion in 2020, according to data from S3 Partners. But Majteles said there was still good reason to stay short.
Tesla has been a "bellwether for a lot of confidence around a lot of topics," Majteles said, arguing that "if its accounting and financial continue to raise the questions they raise, there is a moment in time where that could catalyze certain reactions."
Tesla also has growing competition in the electric vehicle space. Other 'pure play' companies are coming to the fore, with the likes of NYSE-listed Nio and Aptiv, as well as growing investment from auto household names like Volkswagen and GM and battery producers like LG Chem.
The Great Equity Re-evaluation
2020 has been the year of 'growth' companies like Tesla, powering through the pandemic-induced global recession.
Thanks to trillions of dollars in government and central bank financial support, equity markets have hit record-highs, with shares in the "pandemic winners" – such as Tesla – boasting triple-digit gains, which has left valuations looking stretched in some investors' minds.
Markets now face a re-evaluation, Majteles said, adding that in the current upbeat climate in the stock market, he might be "the only one left" that is buying into this right now.
"I might be the only person out there with S&P puts," he said. The volume of put options – contracts that allow their holder to sell an asset at a certain price by a certain date – compared to that of call options, which allow their holder to buy – is close to its lowest on record right now, reflecting the degree of investor confidence.
But this isn't the only market gauge that shows a degree of exuberance, Majteles said.
Even before the pandemic, with significant geopolitical risk and debt markets at "extreme levels," markets have been "ignoring reality for quite some time," he said.
This perspective paid off in March, when markets initially tanked, but Majteles says one is getting "hammered" for maintaining that now. But he stands firm in his view that the optimism in the stock market is too good to be true.
"Eventually there will be an extraordinary reassessment – there always is," he said, arguing that he is not alone in highlighting the "enormous array of frenzy-behaviour – they're obvious to all of us, [and] they cannot sustain themselves.".
However, Majteles believes a shake-out will be healthy. Investors often misread signals from the market and the idea that action from the Federal Reserve, or $600 stimulus checks for households, are enough to allow anyone to look past the realities of the pandemic's devastation of the economy "is ridiculous."
"Much like in nature, forest fires when they occur through natural causes… are welcomed because they create enormous regrowth and rebirth," he said.
"It's only when that occurs that we actually get to work and get this information out that reality is a problem," he added, saying that "until it occurs, I think we keep pretending, and pretending causes problems."
Majteles is once again betting on this outcome. It remains to be seen if he is proven right, or not.
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