Short-seller Carson Block reveals why he'll never bet against Tesla

• Short-seller Carson Block revealed why he will never bet against Tesla and Elon Musk in a letter to investors on Wednesday.
• As Tesla shorts focused on its lack of scale in car production relative to competitors, the company managed to scale its capital base to $700 billion.
• Block has criticized Musk over the years for lying to investors, but recently came to the realization that "a certain amount of bullsh*t is necessary, even desirable in life."
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Short-seller Carson Block of Muddy Waters will never bet against Tesla or Elon Musk, according to a Wednesday investor letter viewed by Insider.

While Block has publicly criticized Musk over the years for lying to investors, he has come to the realization that "a certain amount of bullsh*t is necessary, even desirable in life," according to the letter.

Block had previously held an out of the money put position in Tesla funded by coupons from Tesla bonds he had purchased. But the trade went south in 2019 after Musk "pulled the requisite rabbits out of the hat," Block said.

While Tesla short-sellers often focus on Tesla's lack of scale in car production relative to legacy competitors, the electric vehicle company managed to scale its capital base to $700 billion, which gives the company plenty of optionality in terms of raising billions of more dollars to fund its business.

"All those years of lying (e.g. "funding secured"), wars with short sellers that we assumed were driven only by his [Musk's] pathological narcissism, and trampling rules he found inconvenient have given Tesla capital base scale. With Tesla having an enterprise of ~$700 billion, it has far more capital scale than any competitor," Block explained.

And as some short-sellers still believe reality will shatter Tesla's fragile market valuation, in fact the company should have no problem raising many billions before its valuation becomes "sub-scale," Block said.

But that's not the case for other electric vehicle company's that Block is skeptical of, including Lordstown Motors and Nikola. Block said he remains short XL Fleet, according to the letter.

"The market cap, the luster, the elan of Elon, is still there," Block concluded.

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