Doug Kass: What Does Etsy Tell You About Tesla?

Whitney Tilson’s email to investors discussing Doug Kass’ comments: What Does Etsy Tell You About Tesla?; Insider trading?; David Portnoy.

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Q2 2020 hedge fund letters, conferences and more

3 comments From Doug Kass of Seabreeze Partners:

1) What Does Etsy Tell You About Tesla?

Etsy (ETSY) has about 1,250 employees and $1 billion in sales. And this is now an S&P 500 company?

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Don't even get me started on what they actually do as well, suffice to say they broker tchotchkes .

If this is the future of America, whoa boy!

Yet ETSY is in, and Tesla (TSLA) is not?

I am stunned. Not because I am pro Tesla and believe it should be an S&P 500 company. Couldn't be further from the truth.

Those deciding on S&P 500 inclusions have proven themselves, in my view, to be incompetent.

A TSLA addition would have been right up their alley. Right in line with some of their previous inclusions.

That is why I am stunned Tesla didn't get in.

The S&P committee deemed ETSY more worthy. If ETSY is more worthy than Tesla.... ETSY's Cap is $15 billion, Tesla $390 billion (for the time being). A lot of room between $390 billion and $15 billion.

A lot of people would claim $15 billion is too much market cap for Tesla.

This is all on the heels of Tesla being unable to do a normal secondary offering. This tells you some combination of two things: There was no institutional demand for TSLA at these prices (as evidenced by Baillie Gifford being a seller), and potentially no underwriters were willing to sign their name on an official offering document from TSLA.

In summary:

  • Feckless S&P committee that could care less about anything (price, valuation, fundamentals) not only deemed Tesla unworthy, they deemed TSLA so unworthy that ETSY, a tchotchke broker with 1,250 employees got in ahead of them.
  • No institutional demand at these prices and potentially no underwriters willing to put their name on an offering document here.
  • SoftBank, don't get me started on what they have been up to and the implications of things going the other way. SoftBank seems to be behaving like a massive rogue trader where things went bad, and they are taking more and more risk to try and make it all up. Never seen one of these stories end well.

Position: Short SoftBank

2) Insider Trading

Kass raised questions on Twitter about whether Tesla selling stock last week when it knew it wasn’t going to be added to the S&P 500 index might constitute insider trading:

Etsy

Etsy

3) David Portnoy

Etsy