Vilas Capital may not be a household name, John C. Thompson‘s returns that would make most hedge fund managers jealous. John’s Vilas Capital has produced gains of over 20 percent annually since inception approximately eight years ago. John who has achieved the CFA designation also has a background in mechanical engineering, and has provactive thoughts on one carmaker.
Vilas’s latest big bet? A short position against Tesla Motors Inc (NASDAQ:TSLA). As exclusively reported by us, Vilas believes that not only is Tesla in trouble, but CEO Elon Musk will “likely” end up in prison. We asked the fund manager why he considers Musk will face criminal charges, here is what he told ValueWalk via email:
1. In August of 2017, the company/Elon Musk promised 5000 model 3's per week by December 2017 to help raise $1.8 billion in debt. Moody's also rated the bond based upon this information. Eleven former employees are on the record stating that it was impossible, not improbable, to build cars in volume by then and they told that to Elon Musk. Therefore, he misrepresented material facts while raising capital. This violates securities laws.2. Elon Musk purchased shares in May and June of 2018 while promising "the short burn of the century". He recently wrote that he was in discussions with the Saudi fund for many months, or over a year, to take the company private. This is a clear case of insider trading.3. The statements of "Funding Secured" and the subsequent statements were material and, by his own admission, untrue. There were no signed commitments, no Board approvals, etc. This violates the law as well.These three episodes, far from all inclusive, demonstrate a pattern of wilfully violating securities laws, the backbone of our financial system. In my opinion, the authorities cannot look the other way, no matter the success of the company or the nobelness of its goal.
When asked specifically why he believes that Elon Musk may end up in prison versus possible civil charges, John told me the following:
I believe all of these are criminal offenses, though I am clearly not a lawyer. Martha Stewart, Richard Scrushy, Bernie Ebbers, etc. all had different but similar offenses and they all were charged criminally.
Where do you think Elon Musk will be in five years from now? Comment below to tell us your thoughts!