Short sellers have been causing the company a lot of trouble, Musk is correct in pointing them out so that their activities become known.
If the short sellers are wrong about Tesla being overpriced, they will pay for it. They are taking all of the risk, and they are not hurting anything except Musk's feelings.
So the big short sellers are trying to force the share prices down enough that Tesla is forced to deal with this, which would push the share prices down even more and let them profit hugely.
Umm, yeah. There is nothing special about that.
In fact that is the point.
In other words, the shorts are totally right to be taking their position? A company that depends on its stock price to stay afloat is not a healthy company. Let’s take AAPL as an example. Their stock could plunge to $1/share and they would be absolutely fine because they have positive free cash flow, and thus don’t need to rely ok raising capital via selling shares.
Many of the shorters just think the company's overvalued.
But anyone aiming for that event to trigger is making a bet that enough people will make the same bet, in deliberate disregard of whether the stock's value is appropriate for the actual business.
It's kind of like a prisoner's dilemma. Is it 'right' for someone to defect?
That motive isn't saying anything about the company. It's a pure meta-move. That places outside of the normal "markets efficiently allocate capital" logic. It's profitable but very much not efficient to swing your weight around and make a company go out of business in a way that owes you money.
Investors help companies, right? They add to the demand for the stock, and keep the price up. Stockholders have invested in the company. When shares are created and sold, the new stockholders inject capital into the company, and when shares are re-sold that property of "have injected capital into the company" is in some moral sense transferred at the same time.
Short-sellers do the opposite -- they depress the price of the underlying. If short seller S borrows TSLA from holder X and sells to Y, two people are long TSLA (X and Y), but there is only one share between the two of them. If S hadn't been there, the stock price would be higher.
From the perspective of market efficiency (and the economy) I agree that short-selling is important. I wish it were easier to do. From the perspective of individual companies, though, short sellers are directly harmful to their success.
Given they have a higher market cap than either Ford or Honda, I'd be betting on the latter....
Shorting a stock is not just a statement that you think the stock is overvalued. It’s a statement you think the stock will soon drop, because each short costs money and expires.
Eventually being correct is useless. If for example it performs poorly over the next 20 years and never actually drops you will lose everything.
There is no way you can get a rebate just by shorting the name.
You're probably thinking of the rebate rate, which is the money received by people long Tesla who are lending it out.
Can I prove that’s what’s going on? No, I’m just some dude on the internet. But it really is not implausible at all.
At a stretch, it might make it more difficulmore expensive for Tesla to refinance/raise capital via issuing stock, but that sounds like really bad ROI for billions of dollars.
I think someone would have noticed if Exxon’s balance sheet said something like “Derivative securities - $2.8B”.
Big money has a lot of legal levers to keep their investments in dirty economy profitable that also make sense for them financially.
The 80s was rife with things like this, to the point many became famous for it.
Ford's EV is 145B (42B market cap + 103B debt).
Tesla's EV is 56B (44.5B market cap + 11.5B debt).
Ford and Honda are still valued considerably higher than Tesla.
Ford's debt and assets are largely from its financing arm. It doesn't make the car making part of Ford worth more.
It's a piece of evidence that investors might be wrong.
It's an easy double. Buy Ford, sell of the assets, pay off the debt and pocket $110B for a cost of $42B. Since that's not happening, nor anything like it, investors don't think Ford assets are worth $250B.
An apples to apples comparison between Ford and Tesla to compare valuation means teasing out the part of Ford that actually makes cars. Lumping in the financial services arm makes no sense if intellectual honesty is the goal.
And in any case, EV isn't at all the final word you're making it out to be. If Ford takes on $100bn of debt to finance $100bn of cars with zero margin in order to move metal, now Ford has a $241bn EV. Is Tesla now suddenly even-more-undervalued compared to Ford? Nope.
You're right that Ford probably can't be broken up and liquidated at book value, but my argument doesn't hinge on that.
Who said Tesla was undervalued?
I take it you're not interested in addressing my actual argument given you've deflected twice.
So saying that Tesla is overvalued compared to Ford is like saying "water is wet". By that measure all 499 of the other companies on the S&P 500 are also overvalued.
I haven't addressed most of your arguments because they're both not wrong and irrelevant.
The original point I was refuting was the belief that the stock market values Ford less than it values Tesla. I'm saying that the stock market values Ford at about 3X what it values Tesla. If you disagree with that statement you need to give an actual number, and why.
But the EV of Ford including FFS also offers no insight in to whether Tesla is overvalued. Not even a tiny bit.
If we can agree on that, then we're arguing here for no reason.
This would be true even if things were going well and Musk were going from strength to strength. But Tesla has had a whole raft of problems, many of them self-inflicted. This is catnip to shorts.
Further, part of Musk's strategy has been to bank on the genius-founder stereotype. It has clearly paid off as well; I'd bet that that there's an order-of-magnitude difference between the percentage of people who can name Tesla's CEO and that of any other car company. But again, it's risky; if Musk quit or were forced out, confidence in the company would collapse. And he has made a number of unforced errors; no other car company CEO is in dutch with the SEC. This kind of risk is also hugely appealing to shorts.
It's also worth noting that the shorts were right. Tesla's managed to lose half its value from the peak, and it's still down something like 30%. Some of them have surely made a ton of money.
https://www.forbes.com/sites/antoinegara/2019/03/05/after-ho...
I'm surprised any company has the time to engage and attack those kinds of threats, but I'm not surprised there is an incentive for them to do so. Is it just the lack of time (or maybe optics, for whatever reason) that other companies don't "fight back"?
Because it's incredibly pointless, an utter waste of time, a distraction from things which actually matter, and can veer all-to-quickly into illegal actions as Musk has already found out? (His "taking Tesla private" tweet seemed to have been driven, in part, by a desire to punish shorts. It was later found, of course, to be illegal stock manipulation, and it wiped billions of dollars off Tesla's market cap.)
> Aren't people taking short positions on companies effectively lowering the stock price of the company compared to someone just not buying their stock, and therefore doing potential damage to that company's valuation and future?
In much the same way that people choosing not to buy Tesla shares do, yes. The effect is real, but even in extreme cases, trivial.
It is quite clear that Musk has done vastly more damage to Tesla by worrying about short sellers than the short sellers themselves could have possibly done (eg, with his "taking Tesla private" tweet, but there are many other examples).
> I'm not surprised there is an incentive for them to do so
There is no incentive to do so. It is actively harmful.
They basically continued to grow and show positive financials. Eventually Pershing exited his position.
It’s not worth playing a PR game. You’re just asking to get called out on some statement you made.
The proof is in the pudding. Sell lots of cars. Don’t claim your going to sell 500,000 vehicles this year, then come back and say “oh, I meant if you annualized our peak month”.