Short sellers lost more betting against Tesla than any other company last year
cnn.com
cnn.com
And of all gambles, shorting is the worst. By all I mean "long or short", so I guess there isn't much variation left when you leave shorting out. But with going long on a company at least you can buy and forget. Maybe it bounces back up. Not today or this year but eventually.
With shorting though, it's pure loss. On top of the interest the lender is charging you for the stock that they loaned to you (some 2% last time I checked, when reference rate was pretty much zero). Unlike long where you earn interest (dividends).
So unless you got a really really good reason to short (insider knowledge, some solid stat arb reasoning)... don't do it. Or if you do it, I won't weep for you when you lose.
Tesla could be seen as a less extreme example of the same. Unlike Gamestop, it's a very successful company with a lot going for it. But was it ever really worth more than every other car company combined?
https://www.visualcapitalist.com/charted-teslas-unrivaled-pr...
Or what about rapidly growing revenue every year, which no other car company is currently able to do?
https://www.macrotrends.net/stocks/charts/TSLA/tesla/revenue
Teslas revenue growth is rapidly slowing. Growth contracting by 50% each year since 2019
Tesla has .66x the revenue of GM but 18x the market cap.
Even at todays rate of growth, teslas market cap today is valued at like 100 years in the future.
Disclaimer, I didn’t even do napkin math because teslas valuation is utterly absurd and claiming it’s proper in comparison to other companies in the same segment is completely ludicrous.
A lot of "index fund" folks criticize shorting and other "gambling" tactics, but it's probably worth noting that the argument for the soundness of index funds hinges on there being a class of traders who identify bad businesses and try to drive their price down. Otherwise, you're just pumping money into a snapshot of the market with no regard for the health of the constituent businesses, and it eventually ends in tears.
Active investors, for their part, need to either maintain enough of an edge over freeloaders to justify their pay, or serve a niche market with concerns other than "line go up" (this is where the "hedge" in "hedge fund" comes from).
If every participant is an index investor, then no one is doing the actual work, so the entire system crumbles.
There are certainly ways to use short selling as a hedge for other positions. But in those cases, loosing money on the short is typically good because it (hopefully) correlates to making more money on your main investment.
The people shorting really just miscalculated how long the meme can carry on.
Black-Scholes delta hedging (more fancy called "replication of theoretical option prices") relies on it. Shorting for Black-Scholes also has two facets: one where your loss is limited, when you buy a call then delta-hedge by shorting against it. And another one where the market is up to get you, selling a put and hedging by shorting. Works in theory but in practice you get funked and there's little to nothing you can do against it when it happens. I suspect most "betting against Tesla" shorters were actually institutional put sellers. Case when they weren't "betting" at all but hedging.
Maybe you're getting confused with normal trades where you hold onto your stock and hope it goes up in value (like with any other investment)?
The problem with short selling is that you're actually borrowing.
That all said, I'm not saying I disagree with your point either. It is hard to make an ideological argument when this is really more just different shades of grey. Personally I'd say all investments are a form of gambling. Some investments are just riskier than others.
You have an odd view of how investing or trading works. Why should the only choices be "this will go up" or "im gonna sit this one out". What's wrong with the equally valid scenario of "this is overvalued and will go down"?
Were they incorrect? Sure. But that doesn't mean believing that something will go down is inherently wrong or invalid behavior.
Getting back to being serious, "believing" is pretty much what betting is about. Synonym that is. "jecroisque" / "io crecă" trading system, rofl again :)))) . jecroisque = Je crois que.
An investor who has a lot of tesla shares might write calls to collect premium. Or buy puts for downside protection. Or short tesla shares to offset out-of-the-money calls.
Or maybe an investor has a large position in an ETF that has a position in tesla. If the investor wants to be neutral tesla he has to short the stock in order to cancel out the tesla exposure through the ETF.
I don’t know why the subject of short selling makes peoples brains melt.
The idea being to cultivate an underdog attitude amongst owners.
Even on Reddit's EV and Tesla forums you will see people default to wild conspiracy theories in order to defend the actions of the company or explain why EVs are having issues in certain areas.
> The losses by short sellers are a stark contrast to a year ago, when shorts made a $15.9 billion profit on Tesla shares as the company’s stock lost 65% of the value.
But I'm also not sure where this idea of a whale short seller is coming from. With $13bn in losses almost entirely in 6 months, I would have to imagine there's just some riskier institutional investors.
Another way to look at it is they made it cheaper for people who are bullish on tesla to buy stock.
Because it's an easy target among the financial world, which is divorced from reality in general.
It's not exactly divorced from reality. You can synthetically create the very same position. While it sounds like what they're doing is attacking markets and economy, that's just not the case. Unless they made both the options and derivatives markets illegal and also made borrowing and lending stock shares illegal, shorting the security is a position that can easily be created. It was organically discovered at the Amsterdam Stock Exchange within like a couple years after it was founded. The exchange didn't invent it and start offering it either. The traders simply realized that if they could borrow/lend and buy/sell, then they can take an inverse position.
But the financial world (and the stock market in particular) forces the detachment of "profit" from "(useful) productivity", and this is clear to everyone, even if they don't express it like that.
[1] https://web.archive.org/web/20210305144526/https://mainichi....
I'm no Musk fan with his latest comments, but I disagree with this quite strongly.
Have a look at how many vehicles Toyota have produced for the last 10 years, and have a look at their stock price. Take a guess at their stock price in 10 more years. It's a flat line
Now have a look at the number of vehicles Tesla have produced in the last ten years. Now guess at their stock price in 10 more years.
There is a chance Tesla will make 20 million vehicles by 2030. If they do, their stock price will go up a lot. There really is not much chance of Toyota doing that. (they're not trying to)
Even if they don't hit it by 2030, based on everything else they've done to date, I think it's likely they will eventually get there.
If Teslas price were based on the possibility that they could eventually reach a bit over double Toyota's production, they wouldn't already be almost 3x more highly valued.
Market cap is much more closely related to total profit and future company outlook rather than a current snapshot of the number of cars sold.
And they're not making any $20k car which is how they reach 20 million cars. Guess what the profit per car for those is.
I wonder how almost $200 billion in debt at these interest rates might factor into your calculations? Or were you not aware of Toyota’s debt?
https://www.statista.com/chart/27743/companies-with-the-high...
And again, let's see Tesla a few years down the line when political and social factors start weighing them down, too.
The big automakers have the profit margins they do not just simply because they're all dumb, as Tesla fanboys would love to believe, but because their environment is constrained by many things, primarily legislation.
My guess, Tesla will stabilize as a major car maker, maybe even #1 for a short period of time, and after a while the shine will wear off. They'll just be GM for the internet era.
As for political factors, it seems that would only benefit Tesla vs the other automakers as Tesla only makes electric cars which is where many governments are trying to push consumers to. Other carmakers have to figure out a way to convert their ICE assembly lines to EV lines if we assume that we'll be moving towards a mostly electric future (which I believe, regardless if it's Tesla or someone else who takes us there).
People expect Tesla to grow by doing new things that other companies don’t have the ability to do, either because they have a cash cow they don’t want to disrupt, they don’t appreciate the value software can bring to automotive with some more love than it has been getting, they don’t have the people and culture to take risks and everyone is happy with small tweaks to existing designs, they don’t know how to go back to the drawing board and make a new car and new production line from first principles.
Tesla has learned how to do everything in a decade and has exceeded traditional automakers in some areas and has nothing to lose.
I don’t care about Elon, I have never owned Tesla stock, but I surely admire his ability to execute, and I think that is part of the reason the market assigns such a high multiple Tesla - they are going to be at the vanguard of any developments in the electric terrestrial transportation space.
David vs Goliath when that fits the narrative.
And then fans are all too eager to remind us of the (utterly ridiculous at times) market cap when that fits the narrative.
(Oh yes, absolutely worth more than deep breath Toyota, Volkwagen Group, Hyundai/Kia, General Motors, Ford, Nissan, Honda, Fiat Chrysler, Renault, Suzuki, Daimler, BMW, Mazda and Mitsubishi combined. (Oh, and several Chinese manufacturers: SAID, Geely, Changan, Dongfeng).)
When the only competitor fully keeping up/overpassing Tesla on the EV side is BYD, and VW is cuting through it's workforce to "stay competitive", it gives a lot of pause on the ethics of the car makers in the field.
Do we need to go through a dark age again before ever getting out of the tunnel ?
I give it 50% chance it won't in US - Tesla will release cheaper model by the time BYD starts selling (if ever) in US.
American electric carmaker Tesla has broken ground on a new lithium processing center it says will support the production of up to 1 million vehicles by 2025.
Albemarle plans to build a lithium processing center in South Carolina that will aim to refine 100,000 tons of the substance each year. Building on that project is expected to begin next year.
No it's not. And look at the Tesla forums around.
It is a massive disappointment in terms of range, price, off-road capabilities, repairability etc.
If Tesla solves autonomy I can see them jump right into it.
It then goes on to say that in '22 they, as a group, likely made 15B.
Not much else to it. Attention-grabbing estimate leads to an article whose detail eventually dulls it down. News at 11.
It’s not “un-American”. If anything, the superstition that that short selling harms companies or the economy is “un-American”. It’s good when badly operated businesses go bankrupt. The employees can then work somewhere else where they can make a better contribution to society. Keeping zombie companies alive is bad. (And Tesla made over a million cars last year; bankwuptcy is not happening anytime soon.)