US auto market 'dominated by Tesla', says short-seller Citron

Tesla’s shares were boosted on Tuesday after short-seller Citron, a long-time critic of the electric car company, unexpectedly reversed its position on the stock from ‘short’ to ‘long’.

The move comes even as Citron is embroiled in a lawsuit against the company which was filed in response to a tweet from the car manufacturer’s eccentric chief executive, Elon Muskm, who indicated that he would take the company private for $420 per share, in a $72bn transaction for which funding had supposedly been secured.

Citron, which had originally adopted its short position in March 2016, sued and called the tweets “false and misleading” but has now gone ‘long’ on the company's shares based on its assessment that the manufacturer had taken the auto industry by storm.

“While the media has been focused on Elon Musk’s eccentric, outlandish and at times offensive behavior, it has failed to notice the legitimate disruption of the auto industry that is currently being dominated by Tesla,” said Citron.

The company’s Model 3 and Model S vehicles are both selling well, by far topping US quarterly sales charts for the mid-size luxury and large luxury categories respectively.

The company, which will report third-quarter earnings after market close on Wednesday, is also estimated to have exceeded 80,000 deliveries in the quarter, almost doubling its record performance from Q2.

Consequently, Citron stated that the third quarter was the company’s first chance in its ten years of existence "to prove that it can be a sustainable, highly cash flow generative entity that is no longer reliant on the capital markets."

The short-seller also pointed out that the long-term future looks bright even if Tesla fails to meet profitability targets in tomorrow’s report after gaining clearance to build a wholly owned Shanghai facility, readying the release of the Model 3 in Europe and preparing to unveil a slew of new vehicles.

“Like a magic trick, while everyone is focused on Elon smoking weed, he is quietly smoking the whole automotive industry,” said the note from Citron.

Tesla's shares were up 6.05% at 276.75p at 1624 BST