[, Music, ], hey guys, welcome back to the channel, got an exciting bit of news to talk about today. Um controversial, definitely controversial, michael bury is shorting tesla stock. So michael barry, you guys probably know him from the big short he's.
One of the characters - or he's, a real person, obviously, but one of the characters he's. Christian bale's character in the big short he's, the one that bet against the housing mark in 2008 and made a lot of money in the process.
But recently he has taken to twitter to announce to the world that he is now shorting tesla. So this is what he said in his tweet. He said so elon musk. Yes, i'm short tesla, but some free advice for a good guy seriously issue 25 to 50 of your shares at the current ridiculous price.
That's, not dilution. You'd, be cementing permanence and untold optionality. If there are buyers, sell that hashtag tesla souffle, so that reference to the tesla souffle came from a leaked elite, email from elon musk to tesla employees, where what it said i'll.
Just read you the email, it's, not very long at all. At a time like this, when our stock is reaching new heights, it may seem as though spending carefully is not as important. This is definitely not true.
Now. This is the article that matters so listen to this one. When looking at our actual profitability, it is very low at around one percent. For the past year, investors are giving us a lot of credit for future profitability, but if, at any point they conclude that it's not going to happen, our stock will immediately get crushed like a souffle under a sledgehammer.
So this is where michael barry gets the tesla souffle hashtag from and boy oh boy. I find this news very very interesting because michael bury has now done something that most people try and fail at time and time again.
One of the rules of investing that i like to follow, and that is don't bet against elon musk, but he has. He has shorted tesla and very quickly. If you're, not quite up to speed with what short selling is it's, essentially betting, that the price of a stock is going to go down, so the way it works is that you actually sell first, you sell high and Buy low in that order, as opposed to buying a loan selling high.
The way you do, that is by borrowing someone else's, shares and selling them for the higher price. But at some point in the future you have to buy back the shares to return what you borrowed right. So what you're, hoping for is that you can sell the shares high.
You can then the share price crashes. You can buy them back low and return those shares and you still profit the difference. It's the same as buy low, sell high. It's just the other way around, but the profit remains the same.
So that's, short selling, and what i find really interesting with michael bury when he made this tweet, he showed a photo and the photo was essentially like a little photo of an excel spreadsheet. I guess, but this this photo really highlights the core of michael bury's bet against tesla, so what he did and i'll chuck it up on the screen right now is he gathered the total revenue, the capitalization and the Ebit from 32 large auto manufacturers, then he added those numbers together and then he compared them to what tesla's same numbers are right now, and these are trailing 12 month numbers.
So when we have a look at what those numbers actually were, you can see for the 32 car companies added together. They had revenue of 2.3 trillion dollars, you compare that to tesla and they had revenue of 25 billion dollars.
Then you have a look at ebit and you get 102 billion for the for the 32 auto manufacturers added together and then for tesla. You get minus 70 million. However, this is where things get really interesting.
When you look at the price, so the capitalization, essentially the value of these businesses added together for all those 32 car companies, the price, the , capitalization, 991 billion, so almost a trillion dollars and then for tesla, 646 billion.
So to put that in simple terms - and this is what hamish was talking about - we actually discussed this on the latest episode of the young investors podcast, which is coming out on saturday. But this is what hamish said: you're, essentially paying 50 percent more than tesla to get all of these 32 other auto manufacturers, and in paying 50 more, you're, actually getting 90 times more revenue.
That's, pretty insane right 90 times more revenue, that's; that's quite mind-blowing, looking at ebit negative 70 million for tesla or 102 billion for all those 32 other car companies added together, and the reason that michael Bury points this out is not to maliciously jab at elon musk or at tesla, in fact, from what he wrote.
It actually seems like he is a bit of an elon musk fan like he seems like he. Doesn't mind the guy, but he's, not trying to take a malicious stab at tesla's business and say: oh, the business is going to go bankrupt or blah blah blah blah.
No, it's. Nothing like that, michael barry is simply, in this case, betting against the stock price, because if you have a look at tesla stock over the past 12 months, tesla stock has essentially gone 10x.
I don't know if there's. A word that is more impactful than skyrocket, maybe space rocket to put to put things in the muskerverse, but that's. What tesla stock has done now. Personally, i kind of have two opinions on this topic.
Call me a fence sitter if you like, but i have points for michael barry and against michael barry. I think the first thing that i'll try and defend tesla a little bit. I do think. The comparison that michael bury has made is a little bit unfair because he's saying he quite simply is com straight up, comparing tesla to other auto manufacturers.
We know that tesla is quite different: um, for example, their vertical integration, but also think about tesla is equally as much a hardware company as a software company. So obviously, when you compare a tesla to a general motors, you it's, not really apples for apples, because tesla obviously have the closest thing to autonomous driving that we've seen, and that has significant implications to future revenue, which should Be taken into account and is obviously priced into tesla's stock price and that's, also, not including the fact that tesla is also, i think, destined to be one of the world's.
If not the world's largest battery manufacturer in the future, and they also make products like the mega pack and the power wall, and they also make solar panels. So there are more parts to their business as opposed to just cars.
However, i think it's, fair. That michael barry for his argument compares these like the apple samples, and that is because, right now, where tesla is not thinking about where they're going to be in 10 years.
But right now the key thing to tesla's. Success or failure is quite simply how many cars they can produce and sell. So i think that's, why? He's, making the bet, because i don't think michael barry is making this short placement.
I don't think he wants to keep this short placement open for the next five to ten years right. He is making a he's, seeing the current situation and he's, making a bet on what he sees right now and that's.
Where i go over to the flip side of the argument, where i side a little bit with michael bury michael barry, remember, he is not maliciously jabbing at elon, musk or maliciously jabbing at tesla. He is quite simply shorting tesla because of what has happened with the stock price.
I'm sure if the stock price hadn't surged 10x in the last year and it's. Now got a it's got a p e ratio of 1127.. I mean we're. Usually looking at companies with p e ratios of 20 30, maybe in the current climate, 40 50, because everything's so expensive, but tesla's got one of over 1 100.
, so from michael bury's. Perspective, like i said he's, not looking to short this over the next. Like five years. He's just seeing the current reality as it is, and he's. Seen what & # 39? S happened to tesla stock and he's, making a bet against tesla stock, but he's, not one of those classic wall street shorters that's, going to come out and spread a big.
You know misinformation campaign so that's kind of my take on the situation. I think there are definitely things where michael bury he might have made too much of a simple comparison, but at the same time you can understand the core of his argument.
Is short-term so that's? Why he's, going to compare tesla to the other, auto manufacturers as they stand right now, and he's not going to consider where tesla might be in 20 years from now as what we would do as long-term shareholders.
But anyway, i find that really interesting, because i am you guys know i'm a long-term tesla shareholder, but i also definitely look up to michael burry right. He is a great investor, so it's, an interesting one.
I think that's, why i'm sitting on the fence a little bit, but anyway, i'd love to hear what you guys think have you guys ever shorted a stock. Personally, i've, never done it. I've, never shorted a stock, but i'd love to hear what you guys, what you guys have done in the past, and what do you think about tesla as a business? I'd, really like to hear from you guys.
Tesla is a business versus tesla as a stock, because i think for me personally when i look at tesla as a business. I'm like wow next 10 20 years. This is going to be what a company this is going to turn into.
I look at the stock and i start sweating. I'm like holy moly. It's very overvalued, but anyway, i want to hear from you guys leave that stuff down in the comments section below that'll. Do me for today guys um, appreciate you guys watching keeping up with the new money advent calendar.
So, thank you very much. We're going to keep going. I'll, see you guys again tomorrow, leave a like on the video if you did enjoy it subscribe to the channel. If you're new around here and make sure you hit the notification bell, so you keep getting notified because i'm, releasing a video every single day and they're, going to come out at different times during the Day so definitely hit the notification bell.
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It from me. I'll, see you guys in the next video [ Music, ], [ Applause, ], [, Music, ], [ Applause, ], [, Music, ], [ Applause, ]. You