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Tesla’s Woes Boost Stanphyl Capital

A longtime bear gets a reprieve.

Outspoken Tesla bear Mark Spiegel finally has something to crow about. With a big chunk of his Stanphyl Capital hedge fund short Tesla, he’s up 12.8 percent for the year — 5.5 percent of that in March alone, according to a letter to investors.

Tesla is down about 13 percent year to date, after losing 12.5 percent in March, a month when its shares never traded above $300. They closed Monday at $289.18.

It’s a big comeback for Stanphyl, which ended last year down 17.7 percent after Tesla shares gained 46 percent, closing at $314 — making the electric carmaker one of the worst-performing short bets in a year when most short sellers shone. 

Although Spiegel no longer discloses the size of his position, the stock accounted for 25 percent of Stanphyl’s portfolio last summer, when Stanphyl had been down 20 percent.

Last June Spiegel said he “slashed” the common stock short position to 15 percent “from a much larger size and put 12 percent of the fund into far less volatile January 2020 put options… with a strike price of $210.”

This year, Stanphyl is still lagging the Standard & Poor’s 500 stock index, which gained 13.6 percent through March, and the Russell 2000, which is up 14.6 percent. It also lags those indexes since its inception in June 2011, according to the investor letter. But Stanphyl’s March performance outshone the indexes, when the S&P 500 gained approximately 1.9 percent and the Russell 2000 lost approximately 2.1 percent. 

While Spiegel’s Tesla short is panning out, his general bearishness isn’t. He is short the Russell 2000 and argues that “what we’ve seen since the market’s late December low is a bear market rally, albeit a fierce one. The U.S. economic slowdown is in its early stages.” 

As for Tesla, he now calls it a “busted growth story” since “demand for its existing models has peaked and it will have to raise billions of dollars to produce new ones.”

That said, Spiegel is jaded about the ability of the Securities and Exchange Commission to bring Tesla CEO Elon Musk to justice. The SEC recently asked a federal judge to hold Musk in contempt for tweeting in violation of last year’s SEC order.  A hearing is set for April 4. 

“Despite the terrible precedent Musk’s behavior sets for the CEOs of any other public company, I don’t have much faith that justice will be served here by either the court or Tesla’s fully complicit board,” Spiegel wrote.

The compensation of the board members has become a new talking point for the short sellers — their option grants would give them multi-million paydays. Spiegel characteristically is the most vehement.

“This is the most grotesquely overpaid group of corporate whores I’ve ever seen on the board of any public company,” he wrote in the letter.

Stanphyl has always based his Tesla short thesis on the competition Tesla is up against, starting this year — specifically the Jaguar I-Pace.  “I’ve driven the Jaguar and can assure you that no objective person will say it isn’t much nicer than any Tesla,” Spiegel wrote.

Spiegel told Institutional Investor in 2017 that he’d never driven a Tesla. But, he told II in an email, “I've sat in plenty of Teslas and the Jaguars are much nicer. I trust the pro reviewers to tell me they drive better. And the new Audi interior is nicer than both of them.”

Still, he is now no longer saying a Tesla bankruptcy is inevitable — just possible. “This cash-burning Musk vanity project is worth vastly less than its roughly $60 billion enterprise value and — thanks to roughly $34 billion in debt, purchase and lease obligations — may eventually be worth ‘zero,’” he wrote in the letter.   

An earlier version of this story misstated Stanphyl's 2017 loss. II regrets the error.

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