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Musk's war with short-sellers

Musk's war with short-sellers

Although I am not a fan of Elon's tweets lately, I must admit that I can understand his frustration with those who engage in short-selling stocks while at the same time promoting negative, and often false or misleading, news.

Short selling itself should not be harmful. What I see as detrimental is the "pumping down" of a stock by short sellers.

There are laws in the books addressing securities fraud. There are laws that prevent "pump and dump"; that is, buying stock, spreading false or misleading positive rumors in order to cause the price to go up, them dumping (selling) the stock at a higher price.

To me, a short-seller should be subject to the same laws as any other investor. Yet, they are not, and I see that as an unfair advantage and one that the SEC should look into.

Why doesn't that same concept of "pump and dump" apply to short-sellers? Why are they allowed to "dump and pump"?

In that part, I absolutely agree with an Elon Tweet

Sam_S | 05/10/2018

Tesla's lofty P/E makes it an esay mark for shorts. Nothing unusual there.

Remember when Apple released the larger iPhone and shortsellers spread a rumor that the phones easily bend?

Tesla will contined to be the target of shorts, fossil fuel, and competitors. The SEC, nor anybody else is going to come to the rescue.

All the company can really do is issue a prompt PR or tweet when false accusations arise.

SamO | 05/10/2018

Remember when dipshits missed the entire point?

Short-sellers do not benefit the market.

Naked shorts were once allowed and are now forbidden.

They deserve to die.

SamO | 05/10/2018

Short selling fell under heavy scrutiny during the global financial crisis of 2007 and 2008 when Australia, Canada and several European nations placed bans on short selling of financial stocks. Since that time, regulations have been lifted or amended in some countries, but generally speaking, the United States has more liberal laws on short selling than most of the world.

For decades, certain politicians and prognosticators have alleged that short selling can actually help cause market declines and recessions. There are several reasons why a country might ban short selling. Some believe short selling en masse triggers a sale spiral, hurting stock prices and damaging the economy. Others use a ban on short sales as a pseudo-floor on stock prices.

https://www.investopedia.com/ask/answers/012015/why-short-selling-illega...

Madatgascar | 05/10/2018

Elon needs to stop tweeting. He is sending money to the ticks and leeches, gift wrapped and all.

SO | 05/10/2018

“Elon needs to stop tweeting. He is sending money to the ticks and leeches, gift wrapped and all.”

Hopefully with a string attached that he can yank really hard and pull back the rest of their wallet too.

sschaem | 05/10/2018

The short seller are not getting money from long investors, but other day trader/ short sellers.

Unless you guys think Elon is actually making long investor bail out of the stock ?

At least for me, the heavy negativity from the all media (main stream and social) , and Elon bravado where big reason I got in TSLA.

Only long that get hurt are the one that wanted to sell some shares right now... if you hold nothing negative happen to the company. A tweet doesn't define fundamentals.

What did W. Buffet said ? 'Be greedy when others are fearful'

When the dust settle, the rhetoric on Tesla is going to go 180 degree... Tesla is getting all the hate, but when you have every single auto manufacturer product EV, and EV surpass ICE sales... what then? Where do the fear and hate go.

Anyways, if you are long dont panic... Until we see Q3 result and get Q4 guidance, the story remain the same.

JustSaying | 05/10/2018

Something is brewing. Mr. Musk is no ones fool, I would bet (and have) that many more short-shorts waded into the water over the last two days and when the tide goes out during the earnings call next month they will/should attempt to cover and I am not selling.

carlk | 05/10/2018

The fight is not just for Tesla. In recent Elon's tweets he correctly stated this affects all small investors who have money in stock mutual funds, especially in those most popular index funds. Fund managers, by lending shares to shorts, actually is helping them to destroy values of people who own those shares. Those small investors suffer the loss while fund managers not only is not affected by price drop but they get profits from fees charged for lending those shares. Pretty much the same you buy a gun for someone to kill you. This is the kind of fraud SEC really should investigate. I don't think we have seen the end of it yet.

Ross1 | 05/10/2018

Elon is doing more damage than the shorts and trolls

efuseakay | 05/10/2018

He's the biggest short seller out of all of them. Why do you think he keeps acting like an idiot on Twitter right after the stock recovers?

thedrisin | 05/10/2018

Ignore the short sellers! TSLA is in good company with other large short positions like AAPL, MSFT, BABA for example. Do you think they care? Just concentrate on production and customer service.

dmm1240 | 05/10/2018

"He's the biggest short seller out of all of them. Why do you think he keeps acting like an idiot on Twitter right after the stock recovers?"

He can't do that. All stock transactions by officers of publicly traded companies must be reported to the SEC. Can't be done without going to the pokey.

efuseakay | 05/10/2018

I am saying he's manipulating the stock price with his Twitter outbursts. He knows when he says something stupid on there the stock will tumble.

carlk | 05/10/2018

Elon owns ~$10 billion worth of TSLA. He will lose (or gain) more than anyone out there ever would. He will not sell a single share and does not care where the stock will go tomorrow. He only cares about long term good of the company. Everything else is just noise. Buy TSLA if you think the same. Don't buy, or sell, if you're not.

BozieB | 06/10/2018

Ross1
If and when you can open and fund your own company, and until then, your comments about how Tesla is being ran are kinda 'Moot',
Elon has made a rebuttal toward the 'SEC's rulings', which, in my opinion, has damaged the stock, far more than any short has been able to do.
I do hope Elon will prevail because he is in the right. His tweet made me worry about losing the ability to hold Tesla stock but thats all. The SEC's rulings on the meaning of -possibility of 'funding secured'-, played into the short camp.
The SEC and only the SEC caused the market to go down.
To add insult to injury, The SEC has dictated, we need to muzzle Elon & those 'non stock holders' were injured???

Madatgascar | 06/10/2018

A judge wants to hear about how this settlement will be in “the public interest.”

Musk’s greatest value to society is as a futurist - someone who has demonstrated a unique ability to steer society towards a sustainable future that can last for millennia. That value to society is intangible, but staggering.

Now a soulless government agency wants to prevent him from making forward-looking statements that might affect his company’s stock price. How is he supposed to challenge Tesla, and the world, to make the next great leap forward?

Tesla can easily argue that this kind of muzzle is not in society’s best interest.

carlk | 06/10/2018

Right. We need to back him up for doing the right thing for the society instead of trying to blame him of destroying our stock value. He does care about stock price in ten years, just look at the incentive bonus program the board gave him, but he does not care what it will be tomorrow. We should not too.

Al1 | 06/10/2018

Elon started good fight. This is fight for all of us small investors. And he shouldn't fight it alone. I didn't buy this stock because I expected results in one week. It takes time to build value. And the road could be bumpy. In fact it is expected to be bumpy.

I bought this stock because I believe in his vision and his ability to execute. And I measure his capabilities by products he makes, not by who he dates, or what he tweets.

His tweets may sound crazy but for many idea of dethroning internal combustion engine did sound crazy (still does). Or building space ships without all the money governments have. Or building cars with falcon doors. Or even ramping up production and make "big guys" shake.

sschaem | 06/10/2018

If the argument from the SEC and Tesla for the settlement are public, its going to be very interesting.

Mark Cuban seem to have given Elon sound advice, because of his direct experience. Mark C. wont his case against the SEC, but it did more damages then if he settled.

Yes. If you are innocent its better to settle then prove your innocence against the SEC.

The judge in this case is not present with prof of wrong doing, it was never argued in court.

Also, we assume the judge is wanting to enforce an even stronger punishment then the SEC imposed...
But what if the judge after review decide that the SEC overreached and the demand exceed to the potential damage (if it was proven to be true)

Remember the settlement assume no wrong doing on Tesla/Elon part.

And the proof of burden seem to show that Elon making public his consideration to go private made little impact on the stock price. A 10% move from speculator that assumed shareholder would also want to go private (they did not)

But the SEC lawsuit made public crashed the stock from its pre tweet of ~$360 to ~$260

Elon tweet had little to no impact on the stock. Tesla move up/down 10% on a regular basis.

But the SEC "tweet" crashed the stock by almost 30%

Anyways, Elon was/is right in his critic. And its evident that if concluded Elon/Tesla would have won the lawsuit against the SEC.

Issue is.. you never win against the SEC when wrongly accused. That SEC hammer is a short seller dream.

Ask anyone that won a suit against the SEC....

Mike83 | 06/10/2018

The SEC taking the talking points of the shorters(they don't own stock but need to buy it) is questionable at best.
Happy to see Elon speak up for his rights and our rights.
With the EPA who has had very questionable leadership I wonder who runs the SEC now?

Al1 | 06/10/2018

Listen to the shorts. They make 95% seemingly correct and neutral statements and then add 5% toxic lies. In an attempt to make people sell at lower price and manipulate the stock price.

This is exactly the tactics russians used to manipulate elections. How this should be legal? How these people can not be accountable for the lies they spread?

Al1 | 06/10/2018

And how can SEC turn blind eye to this propaganda and disinformation aimed at value destruction? In fact be in collusion with shorts.

Mike83 | 06/10/2018

I watched Barron(bullish billionaire) on CNBC discussing Tesla. Very positive but the CNBC kept flashing Barron will not take a seat on the board as if he had issues with Elon but listening to the interview Barron only said he is a PASSIVE investor and doesn't do board meeting.
Then they continue to use Elon's tweets as the reason the SP dropped but in reality the SHORTS are shorting the stock down and putting out negative information on Elon. CNBC also brought up Lutz's opinion who thinks Tesla has an inventory and needs dealers. Biased or missing the important points a bit?
This is very disappointing.
Perhaps going Private is necessary and avoid this crap even though some of us may have to sell out. But they could come back pubic in the future.

Al1 | 06/10/2018

Took money out of ETF-s and bought more of Tesla stock. This is my vote of confidence in Tesla team, their products and ability to execute.

mos6507 | 07/10/2018

"The SEC and only the SEC caused the market to go down."

Only in a fanboi hangout does that argument pass muster. SEC would not have acted had Musk not issued the bad tweet...and then shook off the settlement... There's now a not insignificant chance the 2nd settlement lifeline the SEC has generously offered to Musk won't fly due to him continuing to poke the tiger. That's all Musk.

Pretty soon people will be using the same witch-hunt style language that Trump fans do. Seriously, you guys are deluded.

babyjocko | 07/10/2018

You Tesla cultists are in an altered reality. Say hello to Trumpies while there.

The only reason why shorts are targeting TSLA is the same reason why they target any stock: OVERVALUED. The more a stock is shorted, the more likely it is seen as overvalued. It is that simple, it is not rocket science.

Short selling is as old as the stock market. It is vital in the stock market as it helps maintain the equilibrium between those who think the stock price will go up vs those who think it will go down. At any time, that equilibrium is the current stock price. That is the simple basics of the stock market.

Every stock will have shorts betting against it, even those that continuously soar higher. A short can make money on timing the euphoric parabolic curves of a soaring stock (recently, TLRY) and stocks that are financially insecure with high valuations (TSLA).

There is no need to cry about short sellers. Its inevitable in the stock market. The only think to cry over is your decision for putting your money in a financially weak company with lofty valuations.

sschaem | 07/10/2018

"seen as overvalued" .. Yes. and people that short the stock work very hard to make sure the stock is "seen" as overvalued. They dont spend all this money.effort on FUD as a public service. its self serving.

You build a media campaign to devalue the stock. Claim Elon is an erratic drug addict unfit to serve , claim thousands upon thousands of cars are sitting in lots unsold with no buyers, make claims of tesla is going bankrupt not paying its suppliers, that tesla is enron 2.0, etc.. etc... We dont have a day without a dozen article with fabricated negative speculation made to be truth.

At the same time traders place bet buy borrowing share to sell them under media attacks... Creating selling pressure under heavy media FUD. This can bring a company value much lower then its growth prospect.
But yes, this can only be done to a level before even the worse claim because stupid (This is often when value investor pile in)

So share price is often not representative of the company future value when we are talking about a GROWTH company. Stock price is not a measure to reflect a company worth TODAY, but at least 1+ year from now. In some case it can be long term... see Warren Buffet strategy , its often in the 5 - 10 years targets.
multiples and other metric are applied very differently between companies. Example is Ford vs AMD
If you only look at the multiple you would say Ford is so undervalued, AMD overvalued. But here we have a company that will most likely lose market share, while the over enter a market starting with 1% and could multiple sales by 30X

The only thing you can be sure of is that sooner of later a stock value re balances because the BS cant be sustained. This is often why you see major re-adjustment with quarterly reports... A lot of uncertainty goes away.

Tesla is in full FUD mode right now. (As a long, I'm fine with it, just make it cheaper to accumulate)

So yea, maybe short sellers are just tools for longs... All my big stock gain have been buying during heavy FUD time. Thats actually how I got into Tesla.

So lets revisit this after Q4 guidance ?

Mike83 | 07/10/2018

yes. They are in full FUD mode esp. with the enormous and successful Model 3 ramp up. They try to counter good news with timed FUD and they are good at it but for long term investors it can work in our favor.

babyjocko | 07/10/2018

@sschaem, you are case in point of a cultist in an alternate reality. You further cultivate your viewpoint by claiming those with the opposing viewpoint don't play fair and the mediators are in cahoots with them. You block out those messages while absorbing yourself only with the messages you want to hear. This is the true sign of a cultist caught in an alternate reality.

You refuse to realize that there is just as much, if not more, fabricated messages in the media positive on TSLA. In fact, virtually every time Elon tweets, he pumps TSLA, which is the main reason why it has been as volatile as it has been -- Elon tweets, his flock follows. Then there are the analyst holders: "Tesla will be a $4000 stock." And, that was just the other day. BS on TSLA's upside is constant. But, you refuse to see that because you have been hypnotized.

My perspective comes from the outside looking in. I don't own TSLA. I do own a Tesla Model S. I once owned TSLA when it was a speculative stock and made a bit of money from that purchase. But, there is no way I would be in TSLA long or short at this time.

I would not be long because I can see the obvious: Tesla is buried in debt and cannot grow without diluting the stock value...a lot! I figure TSLA will hit $50 before it sees a new high. And, if it were to ever see a new high, it won't be before the next 10 years. That's how long it would take before TSLA can catch up to its lofty valuation.

I'm not short TSLA because of its volatility. At any time, Elon can burst out with a BS tweet (ala "going private") and his faithful will follow with a flood of buys causing shorts to cover thereby quickly raising the stock price.

Instead, I see way too many other stocks in the market that have much better opportunity than TSLA.

Al1 | 07/10/2018

babyjocko

You don't have to waste your time trying to convince us Tesla is overvalued. Try to use your time more productively. Find something you are good at, your true passion.

I don't mind waiting for ten or fifteen years. However I don't think other car makers will have ten to fifteen years to figure out how to make electric cars that can truly compete. Most likely there will be new names from China. Maybe somewhat familiar from South Korea. But it will become harder and harder to sell ICE cars every year.

And that shift in market expectations will be reflected in the stock price.

Al1 | 07/10/2018

babyjocko

You don't have to waste your time trying to convince us Tesla is overvalued. Try to use your time more productively. Find something you are good at, your true passion.

I don't mind waiting for ten or fifteen years. However I don't think other car makers will have ten to fifteen years to figure out how to make electric cars that can truly compete. Most likely there will be new names from China. Maybe somewhat familiar from South Korea. But it will become harder and harder to sell ICE cars every year.

And that shift in market expectations will be reflected in the stock price.

SO | 07/10/2018

What I find amazing is how people like mos and baby complain about cultists but yet they can’t help themselves on being here. That’s more of a sickness than any cult. LOL

SamO | 08/10/2018

Model 3 safest car ever made.

But that’s just rampant Fanboi-ism.

And math.

Rocky_H | 08/10/2018

@babyjocko, Quote: “Short selling is as old as the stock market. It is vital in the stock market as it helps maintain the equilibrium between those who think the stock price will go up vs those who think it will go down.”

Hard to have equilibrium when publishing lies and libel about a company to manipulate its stock price is legal for short-sellers but is a felony for standard investors. I don’t see how you think those are equal. There’s your altered reality.

@babyjocko, Quote: “You refuse to realize that there is just as much, if not more, fabricated messages in the media positive on TSLA. In fact, virtually every time Elon tweets, he pumps TSLA, which is the main reason why it has been as volatile as it has been -- Elon tweets, his flock follows. Then there are the analyst holders: "Tesla will be a $4000 stock."”

Ah, here is where you have created your alternate reality. You think that hopeful predictions about the future are the same as provably false statements of facts about the present. You think the future statements are false just because it doesn’t match your opinion of what you think is going to happen. But by definition, it’s not known whether predictions about the future may turn out to be true or not. But false statements like “Tesla is piling up these cars because they don’t have any buyers for them.” are provably false right now.

7thGate | 08/10/2018

Short sellers are generally helpful for long term investors. They temporarily depress the stock price, allowing for larger positions to be built up by people who believe the stock is undervalued at that price based on its future prospects. When the company executes and demonstrates that value, the investors are then additionally rewarded by the short sellers who are forced to take losses and transfer that money to the long investors.

Of course, if the short sellers are actually right, and the company does not execute up to the potential implied by its stock price, then the situation is flipped and short sellers take the money from the longs who misevaluated the company's prospects. The shorting itself, however, doesn't change the fundamentals of the company's value. They are, in effect, a form of leverage that is paid for by the short seller. They pay in order to magnify the outcome of the stock and take some of the magnified gains or losses.

It remains to be seen if Tesla will be able to execute. Now is the time for them to do so, and the results have been mixed. There are good signs, like the safety report, the large increase in car sales, and the burst rate of production. There are also bad signs, like the missing $35,000 model, imminently due debt, and a Selling, General and Administrative Expenses line item that has stubbornly refused to shrink on a per-car basis enough to bring total cost to Tesla of making, selling and servicing the car below the amount they're paid to do so.

Hopefully, Tesla will be able to get that under control and get it to start scaling down as volume ramps up. Past numbers have not done this, however, as the per-car SG&A expenses have remained close to the same since 2013. Unless Tesla is able to make some sort of structural change to get that number down, the shorts are going to end up right about Tesla; you can't keep selling things for less than it costs you to make them forever.

babyjocko | 08/10/2018

@Rocky_H, while you blame others (shortsellers), your long position in TSLA continues to lose money.

The last thing you will likely learn about the stock market is that its a game with which you have no control. If you want to participate in the game, you have to know that there are other forces that determine whether a stock rises or falls. And, sometimes, those forces are beyond financials and technicals. IOW, it's best if you go with the flow or get out of the way. Otherwise, you will lose a fortune while you blame others for your loss.

Al1 | 08/10/2018

SamO,

You must be referring to overall probability of injury which is the lowest for Model 3 No 1, ahead of Model S No 2 and Model X No 3. Well that metric does not get very high score in tests done by CR. The most important metric goes to sending warnings to a driver. Smart warnings, you know. Like you "are all going to be seriously injured".

SamO | 08/10/2018

Thank goodness for Consumer Reports' substituting its judgment for . . . science.

Al1 | 08/10/2018

sometimes, those forces are beyond financials and technicals.

Forces like lies, libel, FUD, overblown small issues, or completely made up non issues.

Looks like baby might know what he/she is talking about.

Studentid | 08/10/2018

I think it’s overvalued is because everyone has faith in TSLA. If he keeps tweeting uncontructive stuff, more and more people will start losing faith and it will be falling knife as we have been seeing last few days.

Maxxer | 08/10/2018

Part overevaluated because of the tech hype

Tesla-David | 08/10/2018

With all the anti Tesla/EM FUD articles, Tesla owners/fans give me hope, as you will not find any other fan base that will step up to help their beloved companies like Tesla fans do. I find it extremely encouraging to see Tesla owners helping out with M3 deliveries at Fremont and also here in NW at Bellevue Square Tesla SC.

https://www.seattletimes.com/business/teslas-true-believer-owners-volunt...

https://www.telegraph.co.uk/technology/2018/10/01/elon-musk-turns-army-t...

babyjocko | 08/10/2018

There are three perspectives of a stock: the long, the short, and the truth. The price typically always end on the side of truth. Along the way, longs will pump it, shorts will demean it. But, once the dust settles, it will end up on the side of the truth. Dust = volume.

As I've said, as a player in the market, whether you are a daytrader, swing trader, or investor long or short, you either go with the flow or get out of the way. Due to the extreme volatility of TSLA being played by the longs and the shorts, I've decided to get out of the way. My perspective is from the outside looking in. And, although I own a Tesla, unlike the rest of you, I separate the fascination with the car from the stock. Therefore, my view is objective.

My objective view sees that TSLA is just way overvalued. And, as much harm Elon has done with his tweets lately, he and his tweets (along with marketing partnerships) are the main reason why TSLA's price has been as high as it has been. With his tweets pumping TSLA potentially coming to an end, the shorts will become the louder voice.

BTW, for some reason, you people think that what people say about stocks must be true. It doesn't work that way. You can call it exaggerations or lies. It doesn't matter. It's just noise. And, just as with politics, it's up to the individual to filter the noise.

Al1 | 08/10/2018

@Studentid

If he keeps tweeting "uncontructive" stuff, more and more people will start losing faith

Last I checked Elon Musk had 22.8 M followers on twitter. Since you know all smart words like "falling knife" maybe you can also tell us how many followers did Elon lose faith since his last "uncontructive" tweet?

As well as which of those tweets are "uncontructive", as there are quite a few of them, including recent rocket launch and landing of a rocket in California first time ever, Tesla safety test results from NHTSA proving least probability of injury, Elon Musk helping schools in Flint Michigan address contaminated water etc.

Studentid | 08/10/2018

I am sorry I can’t tell you the answer you asked but I am one of those followers who started to lose faith.

Al1 | 08/10/2018

Overvalued as a standalone term is meaningless. Securities valuation only make sense relative to each other. And when looking at these things in perspective everything is overvalued. Most of modern economies consist of services. And guess what? They're all overvalued. Lawyers overvalued, wall street analysts overvalued, business executives overvalued.

You can't simply put your savings into savings account. So you place them into stock market. But where?

Until recently passive investment sounded like a smart thing to do. But turns out its managers may be lending stocks you bought to short-sellers without your consent or even awareness. To me that sounds like fraud. I bought the stock! I own the stock! I don't need any god damn "manager" to touch it without my very explicit consent on every single damn transaction.

I want SEC to look into these shady practices and outright ban them.

Is that "contructive"?

Shock | 08/10/2018

@babyjocko is giving advice some of you should listen to.

Complaining about short sellers is like complaining about gravity after falling off a cliff. It's a reality, you can take precautions or not.

All the gnashing, all the weeping, and the tears and the throes of despair won't do a thing for your brokerage account. Stop being emotional about it.

carlk | 08/10/2018

7thGate I agree with what you said in general. However the tactic used by those professional shorts is to create an atmosphere to choke a good but financially weak company to death. They do not care if the company has good products or good future. All they know is those companies are vulnerable to financing needs in order to survive and grow. That's exactly the tactic they are using on Tesla. Although I don't think it will work. There are plenty of investors out there who are willing to take risk if there is a need. Also Elon is working hard on making the company self sufficient. That will demobilize shorts' only weapon.

carlk | 08/10/2018

Shock why you are still here?

SamO | 08/10/2018

@Al1,

Very constructive.

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