Short Sellerss reached a consensus and took action quickly.
The first breakthrough point they chose was the media.
Early the next morning, "The Wall Street Journal" published a long investigative report on the front page with a concise and deadly title--
"Era Vanguard's Ten Billion Gambling: Leverage Dilemma of a Mysterious Offshore Fund"
The introduction of the report has only one sentence:
"An offshore fund named 'Era Vanguard' has used Tesla equity pledge and leverage financing in the past five months,
Established a position of more than 10 billion US Dollar on Nvidia, becoming the first external shareholder of Nvidia to hold more than 10% of the shares in the past 20 years.
But in the context of the continued decline in Tesla's stock price, this gamble is turning into a dangerous dilemma."
The first part of the report breaks down the position structure of Era Vanguard in detail.
By cross-comparing the pledge records of four investment banks, the SEC's 13D filings, and the transaction data of NASDAQ, the reporter pieced together a picture that is extremely close to the truth:
Era Vanguard holds more than 70 million shares of Nvidia, accounting for approximately 11% of the total share capital of Nvidia.
The comprehensive cost is approximately 146.8 US Dollar, and the current market value is approximately 11.4 billion US Dollar.
A considerable part of the funds for purchasing these Nvidia stocks came from the equity pledge of Tesla--
Era Vanguard pledged approximately 16.6 million shares of Tesla shares in four batches to Citigroup, Morgan Stanley, Credit Suisse and one Private Bank,
The total financing amount is about 3 billion US Dollar, and the leverage has been doubled.
The report specifically pointed out that the 16.6 million shares of Tesla "have all been pledged, and not a single card is left."
The second part disclosed the staking dilemma of Era Vanguard on Tesla.
The report quoted "people familiar with the matter" as saying that the four investment banks' early warning lines for Tesla Pledged Shares were around 225 US Dollar, and Liquidation Line was around 207 US Dollar.
On the day the report was published, the stock price of Tesla had fallen to around 225 US Dollar, which was less than 8% away from Liquidation Line.
The report used an extremely harsh metaphor -
"Era Vanguard is like a person standing between two buildings that are burning at the same time, one is called Nvidia and the other is called Tesla.
He cannot run because Section 16(b) blocks all his escape routes on Nvidia;
He can't put out the fire either because he's running out of cash."
The third part is a precise attack on Era Vanguard Capital Chain.
The report details the cash burn trajectory of Era Vanguard over the past few months--
Apple cleared out about 850 million US Dollar, and in April Add Position Nvidia spent another 500 million US Dollar, plus the 300 million US Dollar pledge deposit just made up.
"Informed sources estimate that Era Vanguard's current book cash may only be over 100 million US Dollar."
And this number is far from enough to support a new round of margin calls when Tesla's stock price continues to fall.
The report also specifically highlighted the 5.4% stake in SpaceX held by Era Vanguard--
"This may be the last card that Era Vanguard can play, but as a private company, SpaceX's equity pledge needs to be approved by Board of Directors, and the procedure is complicated and time-consuming.
Under the current emergency situation, whether this card can be played in time is a huge question mark."
The end of the report put the logic of this sniper completely on the table--
It directly points out that the fatal weakness of Era Vanguard lies in the cross-position structure between Tesla and Nvidia:
Every time the Tesla stock price drops by ten US Dollar, the market value of the pledged assets will shrink by about 166 million US Dollar, and the Margin Call Notice of the investment bank will hit Era Vanguard like an avalanche;
However, Era Vanguard's position of more than 10% in Nvidia is blocked by the hard restriction of Section 16(b) on short-term trading profits within six months. It is difficult to reduce holdings and cash out to raise funds to cover positions.
Even if you force your way out of the market now with a loss, you will still face a huge fine from the SEC.
The report concluded, "For the Short Selling power of Wall Street, the best path to snipe Era Vanguard is so clear that it does not require any imagination--
Concentrated firepower Short Selling Tesla broke through the pledge cover line, forcing the investment bank Forced Liquidation.
Once those 16.6 million shares of Tesla are sold intensively by investment banks on Secondary Market, the stock price of Tesla will face a catastrophic Too Big to Fail,
And Era Vanguard's Ten-Billion-US-Dollar position on Nvidia will also be forced to find a way out at an extremely unfavorable price due to the breakage of Capital Chain."
On the same day, Bloomberg and Reuters also sent follow-up reports respectively.
The title of Bloomberg is more direct - "Era Vanguard's "Perfect Storm": Tesla's pledge is in emergency, Nvidia's position is locked, can SpaceX rescue arrive in time?".
Reuters approached it from the perspective of SEC supervision, pointing out that the 13D declaration submitted by Era Vanguard and HSR Filing had attracted dual attention from the SEC and FTC.
If Era Vanguard is forced to reduce its holdings of Nvidia due to the breakage of Capital Chain, its positioning as a "long-term Strategic Investment investor" promised in 13D will be seriously questioned.
Three reports appeared on the trading terminal of Wall Street on the same day, and the effect was immediate.
Those Hedge Fund who were still waiting and watching after seeing the report of "The Wall Street Journal",
Understand the complete position structure, pledge terms details and funding gap figures of Era Vanguard.
All this was spread out in the sun, so they made the same judgment:
This calculation is very clear, and the risk-benefit ratio is extremely cost-effective.
The fallout from the three reports has been brewing.
However, what really made the market realize that this hunt was no longer just a private competition between several Hedge Funds was an official Short Selling statement issued by Muddy Waters Capital.
Muddy Waters--This institution, which is world-famous for its Short Selling Chinese concept stocks, less than ten hours after the Wall Street Journal report was published,
A brief but fatal statement was issued to Bloomberg via its founder Carson Bullock.
Bullock said in the statement that Muddy Waters has established a Short Sellers position on Tesla, and Short Selling's reasons are based on three points:
First, the delivery volume of Tesla in the first quarter plummeted by nearly 31% from the previous quarter.
Model 3 demand has shown structural weakness rather than cyclical fluctuations, and the order growth rate after Federal Subsidies declined is far lower than management's previous expectations;
Second, Tesla's balance sheet continues to deteriorate, and its cash on hand at the end of the first quarter has dropped to approximately 2.2 billion US Dollar.
It has decreased by about 1.5 billion US Dollar compared with the end of 2018, and the debt due during the year is as high as 920 million US Dollar, so the funding gap is imminent;
Third, the legal dispute between Elon Musk himself and the SEC is continuing to escalate. Once the contempt of court charges are established,
Elon Musk may face penalties that restrict him from serving as an executive of Listed Company, which would be disastrous for a company that relies heavily on the halo of its founder.
"We believe that Tesla's share price will decline significantly further in the coming weeks and months."
Bullock wrote at the end of the statement,
"Muddy Waters generally does not publicly disclose the target and timing of opening a position, but this time Short Selling involves an extensive market game structure--
In particular, some over-leveraged bulls are spreading risks to multiple investment banks--
We believe that public positions help markets price more efficiently.
Fundamentals of Tesla does not support its current market value, and some High Leverage holders are artificially supporting the stock price.
When these leveraged funds are forced to liquidate, Tesla's stock price will return to where it should be."