Would Tesla's Downfall Have A Domino Effect? Tilson Follows Up On Bearish Call

After making a controversial call earlier this week that Tesla Inc TSLA shares will trade below $100 by the end of 2019, former Kase Capital Management hedge fund manager Whitney Tilson followed up on his prediction with several additional points in his Tuesday newsletter.

The Domino Effect 

Tilson highlighted a debate between two of his readers around the potential impact that “Tesla’s demise” could have on other unicorn stocks.

One reader argued that a downfall of Tesla would spook investors for years to come, similar to the way the fall of Enron weighed on the energy sector. The investor said appetite for big tech IPOs like Uber and Lyft could evaporate as well. 

Another reader countered by pointing out that today's unicorn bubble is nowhere near the size of the dot-com bubble when Enron collapsed, and the market won’t ultimately care if Tesla blows up.

Controversial Call

In addition, Tilson highlighted a Seeking Alpha article from Monday that focused on a “secret” conference call Tesla CEO Elon Musk held following his announcement last week of price cuts to the Model 3 and Tesla store closings.

When a transcript of that private call became public, critics blasted Musk for providing new profit and loss guidance and contradicting Tesla’s official written delivery date projections for the $35,000 Model 3.

In the transcript of the private call, Musk said “we’re not going to answer questions like that” when asked about margins on the $35,000 Model 3, but Deutsche Bank said Tesla provided that information to them privately on the same night.

When asked about the fact that a transcript of the call was not initially made public, Musk tweeted: “Tesla comms is fixing. That was a mistake.”

Tilson said Tuesday: “Good to see Musk – finally – admitting that the secret call was a ‘mistake’ – though he blames ‘Tesla comms.'" 

Bearish Analysts

While Tilson’s call for Tesla stock to collapse in 2019 brought plenty of blowback from Tesla supporters, he said Tuesday that Tesla has some of the most bearish analyst coverage of any stock of its size in the market.

“To understand the bull case on Tesla, just pick up pretty much any analyst report,” Tilson wrote.

According to Bloomberg, 15 of the 35 analysts covering Tesla have Sell ratings on the stock.

Tesla shares were trading higher by 0.47 percent Wednesday and are now down 23 percent in the past three months.

Related Links:

Whitney Tilson: Tesla Shares Will Breach $100 By Year's End

S3 Partners: Longs, Not Shorts, Are Selling Tesla

Photo courtesy of Tesla.