May 3, 2017

Hedge funder says investors "hypnotized" by Elon Musk

Dan Primack, author of Pro Rata

Bret Hartman/TED

Hedge fund manager David Einhorn is getting burned by the ever-rising share price of Tesla Motors, which now has a market cap larger than that of Ford. But while Einhorn doesn't understand why investors remain "hypnotized" by Tesla CEO Elon Musk, he remains confident in his fund's short position. From a Wednesday conference call:

"The enthusiasm for Tesla and other bubble-basket stocks is reminiscent of the March 2000 dotcom bubble. As was the case then, the bulls rejected conventional valuation methods for a handful of stocks that seemingly could only go up. While we don't know exactly when the bubble will pop, it eventually will."

Einhorn's argument: Tesla won't be able to mass market its Model 3 "at volumes and margins that justify the current valuation."

Musk's reply: None yet, but he's no shrinking violet when it comes to Tesla doubters.

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