Anthony Hilton: It is really time Elon Musk shut up and let his cars do the talking

It is really time Elon Musk shut up and let his cars do the talking. He has built a factory. He has ambitious targets to reach. He has deposits from would be buyers. They have waited a considerable time from when he announced that he would build a small electric car suitable for the volume market and most are still waiting. Musk has never before attempted anything as ambitious as this. It would be better if he now satisfied the demand.

But he won’t stop talking or using social media, and that is because he is who he is. There are lots of entrepreneurs in the United States but there is only one Elon Musk. He is a phenomenon who has managed to launch his car company and simultaneously lose vast amounts of money – roughly $2 billion (yes billion) – last year but the public and the shareholders love him. People still believe in him. Tesla, his company, has soared since it first went public and has a market capitalisation well ahead of General Motors. The earnings have not yet come through – but they think they will soon.

Not everyone thinks this. The short interest – the people who believe its shares will fall – is considerable. Indeed according to MSCI, the index provider, about 80% of the stock is short, which is by far the largest short in the large cap universe, and indeed is the largest short ever.

The sellers think his business is over-hyped and even if Musk does achieve a profit, other manufactures are also looking to launch electric cars. Rather than being a profits bonanza it is likely to be a profits blood bath. Telsa. they think, has bitten off more that it can chew.

Also, according to the authors of the MSCI piece, heavily shorted stocks have tended to under-perform – in other words the sellers are right. The shares they go for tend to have unpredictable earnings, a volatile share price, high trading liquidity, rapidly growing assets and expensive valuations. Telsa certainly fits that profile.

Musk can be thin skinned and he has been scathing about investment analysts in recent calls particularly when they have sought to challenge him on production volumes. But the thing which really set the cat among the pigeons was his tweet last week which said he had secured funding for a buyout so he could take the company private if he wanted to. That its a big ask. He – or his backers – could be on the hook for $60 billion, though that includes his own shares.

One would assume he would hold on to his own shares, and certain other shareholders might be exempt too. But even the net figure was £30 billion, or half that again to $15 billion, it is still a vast amount of money. That said, Musk is certainly giving the short sellers food for thought, because obviously if he is going to secure a bid at considerably more that the share price – which was his avowed intention – then they will be wiped out.

But is the threat really credible? These are difficult times for private equity because while they have lots of capital to deploy, they are having difficulty actually placing it.

Worse, share prices are high, and that usually ends in tears. Remember how Guy Hands of Terra Firma bought EMI in 2007 and lost a fortune in 2008, 2009 and 2010? Nor was it a one off. Remember in 1987 Jimmy Gulliver went into Harris Queensway a carpets business, and Gateway a supermarket chain succumbed to a bid from Isosceles? Even if you don’t remember, the point is that private equity over paid for both businesses at the top of the market - and they went pear shaped.

The fact is that private equity usually means buying cheap when share prices are low and selling when they are high, With the best will in the world, it is hard to make it work the other way round.

Meanwhile we are nearing the end of the business cycle, particularly in America where a Republican president has stoked up the economy and almost guaranteed that interest rates will rise again to damp things down.

That does not seem a good place for private equity – or Elon Musk for that matter.