Big Short’s Eisman Is Shorting Tesla for ‘Execution Problems’
Big Short’s Eisman Is Shorting Tesla for ‘Execution Problems’
(Bloomberg) -- Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis, is shorting Tesla Inc. over a series of doubts about the electric-car maker.
“Elon Musk is a very, very smart man, but there are a lot of smart people in this world and you’ve got to execute. He’s got execution problems,” Eisman said in an interview with Bloomberg Television. “He’s nowhere in autonomous driving, as far as I can tell, and big competition is coming in his space next year.” Representatives for Tesla didn’t immediately return a call for comment.
Tesla, whose eroding cash position has alarmed some investors, recently asked suppliers to return a portion of payments for parts to help the electric-car maker to turn a profit. Musk, who’s CEO, has said that the company will be profitable in the third and fourth quarters of this year as it produces 5,000 Model 3 sedans a week. The manufacturer exceeded that threshold in the last week of June, but has yet to prove it can sustain those numbers.
Eisman was dismissive of Tesla building cars in a tent outside its California assembly plant and cited management turnover as another negative. Famed investor Jim Chanos, one of the most vocal Tesla short sellers, also has called the number of top deputies Musk has been churning through “stunning,” and has said it’s comparable to what his firm Kynikos Associates Ltd. observed at Valeant Pharmaceuticals International Inc. and Enron Corp.
“The company has lost an enormous number of executives over the last two years,” Eisman said of Tesla on Friday. Referring to Musk, he said “we’ll see -- maybe he pulls a rabbit out of the hat and gets the company going better. So far, the jury’s out.”
Tesla shares declined 1 percent to $303.66 at 9:47 a.m. in New York and are down 2.5 percent so far this year.
Execution Issues
In three of the last four quarters, Tesla has burned through more than $1 billion. The Palo Alto, California-based company may post about $900 million in negative free cash flow when it reports second-quarter results on Wednesday, according to the average of six analysts’ estimates compiled by Bloomberg.
Eisman’s comments on Musk’s execution challenges were reminiscent of remarks a portfolio manager for one of the electric-car maker’s major shareholders made earlier this month.
“We are very supportive, but we would like peace and execution at this stage,” James Anderson, a partner at Baillie Gifford & Co., Tesla’s fourth-biggest holder, said in a Bloomberg Television interview on July 11. “It would be good to just concentrate on the core task.”
Other Shorts
Eisman is betting against real estate listings website Zillow Group Inc., saying its growth has slowed dramatically. Its decision to start flipping homes means it’s entering a “terrible business” that’s cyclical in nature and generates low margins. Zillow did not immediately reply to a request for comment outside normal business hours.
“Zillow’s move into buying and selling homes is a significant pivot from its core advertising marketplace,” Bloomberg Intelligence analysts Andrew Eisenson and Mandeep Singh wrote in a note on July 17. “We think the new business adds considerable risk.”
Zillow fell as much as 6.6 percent, the biggest intraday drop in almost a month.
The fund manager said he’s also betting against Banco Bilbao Vizcaya Argentaria SA and UniCredit SpA because of their exposure to Turkey.
Long GM
Eisman likes General Motors Co. because of its investment in autonomous vehicles. GM’s Cruise unit may end up worth more than the whole company, which is well-run, efficient and throwing off cash, he said.
“The one stock in my portfolio which I say hasn’t worked yet, but that has the potential for a big home run, is General Motors,” he said. Shares in the Detroit-based automaker rose as much as 1.5 percent, paring their year-to-date drop.
GM announced in May that SoftBank Vision Fund would invest $2.25 billion in Cruise, which valued the unit at $11.5 billion. Eisman said GM and Alphabet Inc.’s Waymo are the leaders in autonomous driving, and that he’s also betting on Aptiv Plc.
The fund manager also said subprime auto credit quality is no longer deteriorating. That’s a reversal from March 2017, when he told Bloomberg TV that it was a segment of banks’ business that concerned him.
“I don’t see any of my usual metrics that I look at that are flashing red or yellow,” Eisman said. “Credit quality, which is what I focus on enormously, is probably the best in anyone’s lifetime and there’s no sign of any deterioration anywhere.”
Eisman’s bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which highlighted money managers who foresaw and profited from the market turmoil. A character based on him was played by Steve Carell in the movie of the same name.
For more on Tesla’s recent struggles, check out the Decrypted podcast:
--With assistance from Tom Keene and Nejra Cehic.
To contact the reporters on this story: Neil Callanan in London at ncallanan@bloomberg.net;Karoliina Liimatainen in London at kliimataine1@bloomberg.net
To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, ;Craig Trudell at ctrudell1@bloomberg.net, Jamie Butters
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