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.
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.
Umm, yeah. There is nothing special about that.
In fact that is the point.
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.