Greenlight's Einhorn Says Tesla (TSLA) Shares 'Deserve Much Worse' - TheStreet

Tesla still has one prominent hater. 

Greenlight Capital's David Einhorn continues to bet that Tesla's (TSLA) - Get Report share price will drop in the future, telling his $7 billion activist fund's investors Tuesday that the automaker and energy storage company's shares had an awful quarter and "deserves much worse."

"While the CEO [Elon Musk] makes bold claims about TSLA's superior prowess, continued production shortfalls, defects and product recalls disprove him," Einhorn said in a letter to investors obtained by The Street. "TSLA faces competition from existing [manufacturers] that have decades of scale manufacturing experience."

Greenlight Capital reportedly has a short position in Tesla, which means the fund profits if its share price drops. The exact size of Greenlight's short position isn't clear, and Einhorn's letter to shareholders doesn't explain how long the fund has had a short-position. Nevertheless, it appears that Einhorn's fund has held its short position for some time even as the company's share price has increased. In June, Einhorn reportedly told Greenlight's investors that Tesla "does not make money selling cars and Mr. Musk shows little interest in profits." Nevertheless, Tesla's stock has risen almost 60% this year.

The release of Einhorn's letter also didn't appear to have an impact on Tesla's share price, which spiked up about 1% to $339.17 a share in mid-day trading Tuesday.

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Einhorn also raised concerns about Tesla's plan to create driverless cars. Musk has pledged that by the end of 2017 he will produce a driverless car that can go from Los Angeles to New York with no human driver. Einhorn said that "some of TSLA's presumed market lead in areas like autonomous driving may more likely reflect TSLA's willingness to put inadequately tested and dangerous products on the road rather than a true technological advantage."

He added that the company had an "awful" quarter, both regarding existing results and prospects.

Musk has responded to short-sellers before. In June he tweeted that short-sellers want the company to "die so bad they can taste it."

A Tesla spokesman did not return a request for comment.

The fund has struggled of late with its activist campaigns, posting year-to-date returns of 3.3%. It returned 6.2% net-of-fees in the third quarter of 2017, according to the letter. In June, Einhorn launched his biggest activist campaign ever, a boardroom battle at General Motors Co. (GM) - Get Report . It was also a crushing defeat, with more than 91% of investors giving thumbs down to his plan. Nevertheless, even with the loss, Einhorn noted that GM's shares advanced 16% to $40.38 in the quarter.

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