Robert Chapman believes Tesla shares are extremely overvalued and will drop precipitously.
Chapman downplayed concerns over CEO Elon Musk’s erratic behavior, instead focused on the carmaker’s financials for his bearish view.
“I actually don’t think you should short it on his [Musk] judgement. I think he is a fascinating businessman, probably the most incredible entrepreneur since Edison … Selling him short I think is a mistake,” he said on CNBC’s “Halftime Report” Friday. “I think selling short a $50 billion enterprise auto manufacturer that is struggling to create a business model that is sustainable profitable. That I think is a great trade.”
Chapman confirmed he is still short Tesla shares.
Shorting is a trading strategy that involves selling borrowed shares with a view that the stock will drop in value and the shares can be bought back later and returned for a profit.
Tesla lost nearly $2 billion last year, and through the first two quarters this year it has burned through about $1.8 billion in cash after capital investments. The company had $2.2 billion in cash at the end of the June quarter.
The investor predicts Tesla’s stock will go significantly lower.
“I think inevitably you have a stock that’s headed into the single digits,” he said.
Tesla shares closed at $280.95 Thursday. Its stock is down 6.7 percent Friday after news two company executives resigned and a video was released which showed Musk smoking pot on a podcast.
Tesla did not immediately respond to a request for comment.