My original reasoning on both Tesla and Green Mountain Coffee Roasters is probably wrong so I will be looking to cover both. Both companies may morph into rapidly growing growth stocks and I don’t want to be short that type of stock.
I will be making a decent profit on this short position so it’s no big deal for me to cover.
It looks like Green Mountain has morphed into a profitable and growing business that is buying back its stock.
Ugh… I will be losing a lot of money on this one. Unfortunately this is my biggest short position and was the short position I was most excited about.
I guess I have to hand it to Elon Musk. His crazy, crazy plan might actually work. Tesla’s customers love their cars (despite some flaws), people are buying the Model S, Tesla has pushed the envelope in terms of innovation, and the company looks like it will be profitable. He has done an excellent job in promoting the Model S and in financing Tesla (e.g. through selling stock at high prices). My original thesis for shorting Tesla was because I didn’t think it would turn a profit and would face liquidity problems. It looks like Tesla’s economics might work out after all. It’s conceivable that the Model X will generate even more profits than the Model S. Tesla could turn into the highest-margin and fastest-growing car manufacturing out there. Even if it doesn’t work out that way… the short sellers can get brutalized in the short term. The interest on the borrow is almost 40%. Tesla can raise equity and push its intrinsic value towards its market cap. Its share price may stay high for a few years in anticipation of the next car (or the car after that).
I am going to buy back some common stock and hold onto my put options. If Tesla shares do happen to nosedive, I may sell the put options.