Tesla CEO Elon Musk lashed out on social media at Greenlight Capital President David Einhorn following the investment firm’s Q3 investors letter, in response Einhorn called Musk out on a number of issues, such as accounting actions Einhorn considers “curious.”
The president of investment firm Greenlight Capital, David Einhorn, has long been a critic of Tesla CEO Elon Musk. Musk has previously criticized Einhorn on multiple occasions, even sending him a pair of “short-shorts” to ridicule Einhorn’s short position on Tesla stock. Einhorn stated in his recent Q3 investor’s letter:
TSLA appears to continue to spin positive PR ahead of the safety and fair treatment of its customers. For example, in August Walmart sued TSLA because its solar panels were catching on fire. Rather than warn its solar customers when TSLA became aware of the fire risk, TSLA allegedly created Project Titan – a covert program to replace the defective components while staying out of the news. Similarly, in response to a series of car battery fires, instead of recalling the batteries, TSLA appears to have quietly issued a “software update” to the battery management system that has a side effect of reducing battery range. TSLA has chosen not to warn or compensate its customers for the decreased performance.
Finally, to the surprise of nobody, documents in TSLA’s SolarCity litigation unsealed in September showed that Elon Musk knowingly orchestrated a significant fraud by arranging the $2.6 billion acquisition at a time when SolarCity was insolvent. Musk and his family had a huge conflict of interest, but rather than properly recusing himself, Musk initiated the transaction and drove the process. SolarCity was so cash-strapped, it was trying to delay payments to vendors after parts were delivered and the vendors had recognized the revenue; SolarCity could not raise any funds at reasonable rates from third parties; and Musk engineered the unveiling of the Solar Roof tile to convince TSLA’s shareholders to approve the deal, even though the product did not exist at the time.
As was the case with Musk’s extraordinary “funding secured” tweet last year, we believe this level of trampling of standard processes of corporate governance, ignoring methods to deal with related party transactions and self-dealing should lead to substantial consequences. For now, the accepted reality appears to be that Elon Musk is above the law.
Musk responded to Einhorn with his own letter, referring to Einhorn as “Mr. Unicorn” the German translation of Einhorn. Musk accused Einhorn of making “false allegations” about Tesla and invited him to have an open discussion with him about the company:
— Elon Musk (@elonmusk) November 8, 2019
Einhorn hit back harshly at Musk in his own letter asking Musk to clarify which false allegations were made about Tesla. Einhorn noted that there are entire websites dedicated to chronicling Elon Musks’ failed promises and untruths. Einhorn’s letter states:
I am glad that you read our October letter and would like to discuss it. You say we “made numerous false allegations against Tesla.”
Could you be specific? Can you point to at least one sentence that is false and refute it with facts? We certainly are capable of making mistakes and if we said anything false, we will correct it for the record. Facts do matter to us. I can’t imagine how it would feel to have entire websites like https://elonmusk.today chronicling your untruths.
Einhorn stated that he’d be more than happy to discuss Tesla and that Musk’s sudden openness was in stark contrast with how the company had acted previously, refusing to answer multiple questions from Einhorn:
We welcome your offer to let us learn more about Tesla and will take you up on it. This is a stark contrast from Tesla’s prior position, as your IR Team has refused several requests from us to converse directly and answer our questions.
I think facility visits would be fun (can we start in Buffalo?). I might learn the difference between your alien dreadnought factory and cars made by hand in a tent.
The truth is we are much more interested in, and have many questions about, your financial statements. Perhaps, we could spend time together with your CFO, Zach Kirkhorn.
As an example, my understanding of auto sales is that car buyers don’t typically drive off the lot without paying for the car. Publicly-traded auto dealers have only a couple days of accounts receivable balances. Yet, Tesla is owed over $1 billion by its customers. With customers paying up front, why are the balances so high? In September 2018, you said the receivables doubled up because the quarter ended on a Sunday. That answer wasn’t very satisfying at the time. This year, the quarter ended on a weekday. Sales are lower than they were a year ago and yet, the receivables stayed high. We are curious.
Einhorn finished his letter stating: “I truly appreciate your offer to build a direct communication so we can learn more about Tesla. Please advise on how we should go about scheduling. And have a nice weekend.”