This isn’t the first time that sparks have flown between Tesla CEO Elon Musk and Microsoft co-founder Bill Gates over the latter's investments. As Walter Isaacson recounts in his biography of Musk, the two billionaires got into a tense dispute over Gates’ short investment in Tesla.
Once again, a post on Musk’s X profile has reignited tensions between the two billionaires, who have remained distant since that incident.
A warning without cause. Gates was recently drawn into another discussion with Musk out of the blue about investors who were betting against Tesla. The conversation began when an investment analyst mentioned Tesla short sellers, or those who bet that the the company's shares will decrease.
Musk responded swiftly: “Once Tesla fully solves autonomy and has Optimus in volume production, anyone still holding a short position will be obliterated. Even Gates.”
What kinds of investments? Short selling, or having a short position, involves betting on a stock's decline. In the stock market, an investor typically buys a company’s shares in anticipation of the share price increasing, allowing them to sell the shares at a higher price. However, it’s also possible to profit from a stock’s decline.
To do this, an investor “borrows” shares from a broker and sells them, committed to repurchasing them within a specified period and returning them to the lender. For example, if an investor sells borrowed shares for $100 and the shares lose 50% of their value, the investor can buy them back at half the price, making a 50% profit when returning the shares.
However, if the share price increases instead of decreasing, the investor will need to buy back the shares at a higher price, which results in a loss. The greater the decrease in share price, the higher the profit for the investor (and their company).
Gates’ short position. As Isaacson told CNBC, the conflict between Gates and Musk rose in 2022.
Musk wanted to increase his philanthropic contributions and Gates decided to show him some of his foundation’s projects. During Musk’s visit to Gigafactory Texas, Tesla’s manufacturing facility in Austin, he found out that Gates held a $500 million short position in Tesla stock. This angered Musk, leading him to end any negotiations with Gates abruptly.
“Sorry, [but] I cannot take your philanthropy on climate seriously when you have a massive short position against Tesla, the company doing the most to solve climate change,” Musk wrote in a text to Gates, according to Isaacson’s biography.
Gates’ support for Tesla still stands. Despite their differences, the Microsoft co-founder has continued to express his support for Tesla in various interviews. He has even praised the company’s work on automotive electrification. However, as Fortune reports, whether he still holds his short position in Tesla is unclear.
In any case, Musk’s response on X has sparked suspicion that, despite publicly supporting the company, Gates may have profited from the decrease in Tesla’s share price due to poor sales data in the final quarters of last year and early 2024.
Gates capitalized on Musk’s salary. Poor sales data and intense internal strife between investors over Musk’s billion-dollar bonus led to a steep 32% drop in the company’s stock market shares. This implies that if Gates had maintained a short investment position, he would’ve seen a significant capital gain in the past few months.
“Obliterate” is a strong word. Musk’s statement referred to two significant milestones that would “allow” him to “obliterate” those who have bet against Tesla. These are achieving full autonomy for its vehicles and producing the Optimus robot. This was by no means a trivial threat.
According to Musk’s estimates, each humanoid robot could bring in a 50% profit margin, translating to $1 billion annually. Additionally, Fortune estimated that Tesla’s fleet of robo-taxis could generate an additional $5 billion in profits. If these projections materialize, Tesla would surpass Nvidia, Apple, and Microsoft to become the world’s most highly valued technology company. It sounds good. However, these are just estimates, and reality may unfold differently.
Image | Wikimedia Commons [Lukasz Kobus/European Commission, Ministério Das Comunicações]
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