Tesla Superconsumers Are Making Millions—Because They Have An Information Advantage Wall Street Doesn’t

They don't call them "Teslanaires" for nothing.

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Dear Friend, Subscriber, and fellow Category Pirate,

Tesla shorts lost $38 billion dollars in 2020—many of whom are quite famous and experienced investors like Jim Chanos who famously shorted Enron before it collapsed. 

Credible business publications like the Wall Street Journal and CNBC have had opinion writers like Charley Grant repeatedly predict the doom and gloom of Tesla, despite the fact that TSLA stock rose 7x in 2020. For example, Charley Grant went on CNBC on July 25, 2019 and said the days of Tesla as a growth darling are numbered. 

This was shortly after one of us Pirates (Eddie Yoon) went on CNBC on June 11, 2019 and said that Tesla would bounce back like Netflix did in 2011. 

Many retail investors who were bullish early on Tesla have reaped the benefits of the $38 billion dollar short loss. So much so, that near the end of 2020, Bloomberg called these successful Main Streeters “Teslanaires.”

In a time where income inequality has never been higher, Tesla’s mid 2019 to 2020 stock performance may represent the single greatest transfer of wealth from Wall Street to Main Street. 

Which begs two questions:

• How was it that “Wall Street experts” were so wrong about Tesla?

• And how is it that so many “Main Street” investors were so right?

The truth is, it’s very difficult for Wall Street to value Category Creators, who by definition blur the lines of current categories while pursuing strategies and business models that are so radically different it can confound “experts” in legacy categories. When there are no comparison companies, no pattern recognition, Wall Street analysts do not know how to “model” the business—and as a result, assume it is overvalued.

It is also the case that much of Wall Street is risk averse, pursuing legacy M&A strategies of consolidation and stripping out ‘synergies’ (e.g., cost cutting) opposed to M&A that accelerates new categories. The former is easier to calculate. The latter, through their eyes, edges on speculation.

But there is a massive canyon between M&A for Category Consolidation and M&A for Category Acceleration.