Why the Man Who Predicted the Housing Market Crisis Went ‘Short’ On Tesla

It’s always a predicament betting against Elon Musk

Image: Business Insider
Image taken from Dr. Burry’s Twitter account on December 2nd, 2020
Image: Flowbank

This is essentially what short-sellers benefit from!

In simple terms, when you are selling short a particular stock you are betting against the stock price going up. The simplest way to profit is to sell the shares at a high price to repurchase them later at a lower price, and the “short-seller” pockets the difference. The one thing which needs to be kept in mind is that the shares that were sold short, are in most cases borrowed from someone else. Thus it is essential to buy the shares back later so that the short position can be closed.

Elon Musk was about to bet the entire company on this little dream.

Manufacturing facilities were hence subsequently upgraded. New factories were built. The company invested heavily in automation to cut costs across the board, and they desperately tried to scale from being a small manufacturer of luxury sports cars to a massive player in the mass market segment.

Production Hell

Musk had laid out the unit economics that could potentially put the company on a path to profitability. He needed Tesla to churn out 5,000 Model 3’s each week to break even — the point at which the company could potentially turn a profit on each car sold.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store