Vocal Tesla short seller has reversed course, driving shares higher

Citron Research, an influential short-seller that has been a staunch critic of Tesla, reversed its position on the electric automaker. The about-face, which Citron Research outlined in a research note Tuesday, helped pushed Tesla shares up 12.7 percent to close at $294.14.

The research note, entitled, “Citron reverses opinion on Tesla. The story has become too compelling to ignore,” explains that it has taken a long position in Tesla because “the Model 3 is a proven hit and many of the TSLA warning signs have proven not to be significant.”

Investors who take short positions on a stock are betting the asset will fall in value. Citron Research, which was founded by Andrew Left, has been a reliable and often vocal Tesla “short,” a position it has stuck to for years now. Nearly five years ago, Left argued that multiple 200-mile-range-plus electric vehicles would be on the market before the Model 3. In March 2016, Citron said in a tweet it expected Tesla’s stock price to hit $100 a share by the end of that year due to supply and demand problems.

Citron (aka Left) now says that Model 3 sales as well as continued demand for the Model S, has changed its thinking.

“Tesla appears to be the only company that can actually produce and sell electric cars,” according to note. “If you would have shown us the below chart five years ago there is no way we would have ever believed it. It looks like it is the competition that is taking the Ambien.” (CEO Elon Musk has tweeted about taking Ambien.)

A tweet from Citron Research early Tuesday also warned that Tesla’s decision to report earnings Wednesday “might be a bad sign for shorts.”

Even with this sudden shift to a long position, Left said in the note that the company is “still suing Musk and Tesla and this recent report has no bearing on the current lawsuit.” Left is suing Tesla for alleged securities law violations stemming from Musk’s infamous going-private tweets in August.

Tesla has faced notable headwinds, including a volatile stock price, “production hell” and later, logistics/delivery hell with the Model 3, as well as a securities fraud complaint and subsequent settlement agreement between CEO Elon Musk and the U.S. Securities and Exchange Commission. There has been a steady stream of high-level executive departures and questions about worker safety in its factory.

At the same time, Tesla still has very few competitors, if you look at comparable price and battery range. And sales continue to rise, indicating that all the drama around Tesla hasn’t impacted demand.

The Chevy Bolt, an all-electric hatchback that gets an EPA estimated 238 miles to a single charge, went on sale in late 2016. And while it was the first all-electric EV priced under $50,000 capable of delivering an EPA-rated range over 200 miles, sales plateaued and are down 17 percent since the beginning of 2018, GM reported in early October.

Jaguar is the newest all-electric luxury category competitor with the introduction of the I-Pace, which has a base price of $69,500 and an EPA estimated range of 234 miles. The first I-Pace deliveries are just trickling in now. The wait continues for other expected entrants to hit the marketplace, including the Audi e-tron, an electric SUV that seats five and starts at $74,800.

Meanwhile, the Model 3, which has a base price of $45,000 for a new rear-wheel mid-range variant that has a 260-mile range, sits alone.

And Citron Research has been won over — at least for now.