Tesla's (TSLA, Financial) stock has been under pressure due to disappointing Robotaxi announcements, cooling electric vehicle demand, and increased industry competition. However, Carson Block, founder of well-known short-selling firm Muddy Waters, expressed that he would not short Tesla. Block concluded in 2021 that shorting Tesla was unwise, recognizing Tesla's substantial capital scale as its safety net.
Block highlighted Elon Musk's understanding of the necessary capital scale, which allows Tesla to continue raising funds even as it faces financial losses. This represents a significant shift for Block, who previously shorted Tesla and held long-term put options on the stock years ago. He emphasized that although Tesla's stock is volatile, the company can continue to attract funding, removing the risk of bankruptcy that shorts often anticipate.
Tesla's financial health remains a major concern for investors. While the company achieved its first consecutive four-quarter profit streak in Q2 2020, recent years have been challenging. Slowing demand and increasing competition have led to disappointing free cash flow and revenue figures in recent quarters, causing skepticism about Tesla's high stock valuation. Hedge fund manager Per Lekander recently labeled Tesla as "the largest stock bubble in history," predicting a dramatic 93% drop to $15 per share.
Nevertheless, Block is unfazed by these factors, confident that Musk will continue to defy doubters, stating, "Elon always finds new tricks." Despite recent stock declines, he refuses to bet against Musk. Tesla shares fell by 0.84%, closing at $218.85, marking a more than 12% drop over the past month.
Block also expressed optimism about the broader U.S. stock market, suggesting that large-cap tech stocks remain a sound investment despite high valuations. He believes inflows into U.S. stock markets, particularly from retirement funds, will drive further growth, especially for the largest market-weighted stocks. "Don't overthink it; invest blindly in the American tech giants," Block advised.
