Tesla Shares Decline After Einhorn Publicly Questions Automaker's Accounting Practices

David Einhorn, a famed short-seller, questioned Elon Musk, the CEO of Tesla Inc. TSLA, Thursday on Twitter, about the automaker’s accounting practices.

What Happened

Greenlight Capital founder Einhorn, who is known for having short-sold Lehman Brothers’ stock before it collapsed in 2008, tweeted Musk directly, asking him and the Tesla chief financial officer Zach Kirkhorn pointed questions. Describing his inquiries as “More Boring Bonehead Questions,” Einhorn questioned the veracity of Tesla’s accounts receivable, his shuttered factories, and the effect of currency market movements on the company.

Einhorn demanded answers, writing “Can you or Zack [Zach Kirkhorn] explain?” The investor said if the question was left unanswered, he would “be left wondering” if indeed all Tesla’s account receivables were “suspect,” along with its income statement.

Why It Matters

Tesla’s shares closed more than 2% lower on Thursday, erasing an intraday gain of nearly 8.7% after Einhorn’s public questioning of the automaker’s accounting practices.

In its regulatory filing, Tesla disclosed that an unidentified entity made up for more than 10% of its accounts-receivable balance, as of March 31. The contribution was related to sales of regulator credits. 

Emissions credits sales by Tesla escalated to $ 354 million last quarter, which is more than Tesla’s $227 million adjusted net income.

Tesla’s production in the United States has been shuttered since March-end, and its bid to reopen the Fremont factory failed. At the company’s earnings conference call, Musk called the order forcing the Tesla factory to remain shut “fascist.”

In November 2019, Musk had lashed out Einhorn, alleging the fund manager had made “numerous false allegations” and mockingly offered him a pair of short shorts.

Musk’s distaste for short-sellers is well-known. Tesla recently appointed Hiromichi Mizuno, a Japanese pension fund manager, to its board. Mizuno is known for his challenging market practices like short-selling.

Price Action

Tesla shares traded 2.16% lower at $765 in the after-hours session on Thursday. The shares had closed the regular session 2.33% lower at $781.88.