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Tesla Short-Sellers Lose $1 Billion (cnbc.com) 458

An anonymous reader quotes CNBC: A bullish call from a Wall Street analyst capped off a rough week for Tesla short sellers, with Nomura Instinet advising clients that the electric car maker's shares could rally 42 percent over the next year. The stock rose 1.7 percent Friday and is now up 10 percent on the week. One of the most shorted stocks in the United States, Tesla shares cost investors betting against the company more than $1 billion in losses on Wednesday alone after the stock rallied 9.7 percent. Adding to the short woes, the stock is up 13.5 percent in June and up 21 percent since April. More than 30 percent of Tesla's floating stock is currently sold short, according to FactSet.
Last week long-time Open Source advocate Bruce Perens (Slashdot reader #3,872) argued this is fueling Musk's anger at the press: [A] great many investors are desperate to see Tesla's stock reach a much lower price soon, or they'll be forced to buy it at its present price in order to fulfill their short positions, potentially bankrupting many of them and sending some out of the windows of Wall Street skyscrapers. These investors are desperately seeding, feeding, and writing negative stories about Tesla in the hope of depressing the stock price. Musk recently taunted them by buying another 10 million dollars in stock, making it even more likely that there won't be enough stock in the market to cover short positions. If that's the case, short-sellers could end up in debt for thousands of dollars per shorted share -- as the price balloons until enough stockholders are persuaded to sell. Will short-sellers do anything to give Tesla bad press? You bet.... Musk is stuck with a press that feeds negative stories about Tesla seeded by short-sellers, business competitors and the petroleum industry, and even the U.S. Government...

Musk is far from the only one who suffers from this abuse. I was personally involved while the Linux developers were hounded by bad press for years from Forbes and lesser entities, backed by a large software company we all know (and who is, surprisingly, funding more Open Source these days), based on SCO's unfounded lawsuit. Time proves them wrong, but don't expect them to admit it, nor should you hold your breath for an "I'm sorry".

And on Musk's plan to rate the credibility of news sites, Perens writes that "The world would be a better place if this was done honestly, with integrity, and well. Musk is one who has improved the world by going where conventional wisdom said he'd fail..."

Tesla Short-Sellers Lose $1 Billion

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  • Well done! (Score:5, Insightful)

    by Anonymous Coward on Saturday June 09, 2018 @11:40AM (#56755354)

    I wish you well Mr. Musk. You have inspired many people, and you surely have integrity in this world of Wall Street defeatists.

  • Telsa? (Score:4, Informative)

    by rossdee ( 243626 ) on Saturday June 09, 2018 @11:41AM (#56755356)

    great headline guys..

  • Still curious (Score:4, Interesting)

    by Artem Tashkinov ( 764309 ) on Saturday June 09, 2018 @11:46AM (#56755378) Homepage
    How is the stock market different from the betting/gambling market.
    • One way in which it is different is it allows companies to get funding by issuing stock, thus allowing them to grow faster.

      Another is, as opposed to playing at a casino, investing in a diverse portfolio actually gives you positive gains over a long period of time.

    • In gambling, the game is rigged by the house to statistically always be in their favor. The stock market is different because there is no rigging (outside of insider trading).

      In cases where a company is obviously doing something right or wrong, this helps it rise or fall in the market, thus encouraging economic optimizations which increase our standard of living for the same amount of effort expended.

      It only starts to look like gambling when all the obvious low-lying optimization fruit has already be
  • Ethics in Journalism (Score:5, Interesting)

    by Kunedog ( 1033226 ) on Saturday June 09, 2018 @11:47AM (#56755382)
    As soon as Musk announced his plans to hold corrupt journalists accountable, this is how many of them started covering the story:

    http://archive.is/WdAq6 [archive.is]

    FEMALE JOURNALISTS: Have you been harassed by Elon Musk fans? Please DM me your most horrific tweets and messages. AND PLEASE SHARE THIS

    Completely ignoring the ethical concerns to run off and manufacture a narrative of mysoginy and harrassment . . . the same Gamergate-style behavior all over again.

    • by AbRASiON ( 589899 ) * on Saturday June 09, 2018 @08:46PM (#56757744) Journal

      Exactly what this guy said.

      As soon as he got sick of mediocre journalism, within 48 hours I saw "Elon Musk, Tech Trump?" and "Elon Musk, just another nazi!" headlines pretty much on most sites.

      That womans tweet is a fucking prime example "PLEASE SOMEONE PROVIDE ME THE NEWS I WANT TO PRINT"

      If the media keep behaving this way, they'll continue to create people skeptical of them.

  • There are plenty of options, pun intended, for shorts to protect themselves. They can buy calls to protevt against a further upseing or close some of their position so they dont eat the whole enchilada if theyre wrong

    If they chose to hold to the botter end then they will reap what they have sown

  • By the numbers (Score:5, Interesting)

    by Okian Warrior ( 537106 ) on Saturday June 09, 2018 @12:05PM (#56755468) Homepage Journal

    I've been looking at the stock market reporting for the last couple of years, and to make it interesting I bought some Tesla stock awhile ago.

    My take is that all of the "important insightful" news reports we see about companies boil down to the following:

    1) Reporter picks some stock to report on
    2) Plugs the numbers into an algorithm that spits out a recommendation
    3) Writes an article justifying that recommendation

    Notably, reporters don't write about a stock because something happens or because it's a particularly good investment, and they don't muse any personal skill at analysis for the article - they basically take whatever is happening at the moment and use it to justify whatever is going on with the stock.

    Daily market reports are always "Dow is down x% due to *this* thing happening in the world", as if the world incident is driving stocks. (As I write this, one of the top stories is "Dow posts best week since March as traders shake off G-7 trade jitters". The two linked points of information are unrelated.)

    In the case of Tesla, the company is taking all their profit and borrowing extra to invest in manufacturing facilities. From the viewpoint of the algorithms, Tesla is burning through cash with no hope of recovery, as the chart on this page [businessinsider.com] shows.

    Any other company with Tesla's numbers would be a lousy investment. We see this all the time in other companies - burn through VC cash over a couple of years and then go bankrupt (or get bought out). (GitHub anyone?.)

    Looking more closely at the chart shows a different story. Tesla takes several quarters to tool up, then releases a model and goes profitable for a while. They've done this twice now and are on the verge of a 3rd round. Once the Model 3 production is fully ramped up they will be positioned to *own* the car manufacturing industry in the US.

    Tesla is a great opportunity to "go against the groupthink with reason", and Bruce has it exactly correct: Tesla stock will be closely held, making it ever more expensive to cover the short positions. Expect a temporary meteoric rise in value as the short holders fight each other trying to get out of their short positions.

    Oh, and Tesla isn't one of the most shorted stocks in the US. It's the *most* shorted stock *ever*.

    • "Once the Model 3 production is fully ramped up they will be positioned to *own* the car manufacturing industry in the US."

      Makes total sense.
    • Options contracts have plenty of valid uses... it is really like insurance. Suppose you have a contract to sell something in Euros and your business is in USD, you can buy puts in case the Euro flops. Farmers do the same thing in case there is a bumper crop and they would otherwise lose money on their crop.
  • Musk recently taunted them by buying another 10 million dollars in stock, making it even more likely that there won't be enough stock in the market to cover short positions. If that's the case, short-sellers could end up in debt for thousands of dollars per shorted share -- as the price balloons until enough stockholders are persuaded to sell.

    Wow! Now, that’s W.C. Vanderbilt-level shenanigans there!

  • by dfghjk ( 711126 ) on Saturday June 09, 2018 @12:20PM (#56755542)

    Interesting that the summary devoted ¾ of its space to comments from Bruce Perens. Is this really about Tesla short sellers or is it pushing a narrative?

    • Bruce and Rei are on a mission to convince us that Musk is a visionary who will one day lead us to Mars and freedom. No, I am not joking.
  • Remove the veneer (Score:5, Interesting)

    by sjames ( 1099 ) on Saturday June 09, 2018 @12:54PM (#56755696) Homepage Journal

    Let's remove the gilded veneer from this. There's a bunch of degenerate gamblers who now find themselves in to their bookie for more than they got. They're desperate enough that some of them are trying to demoralize the players to tank their chance at the playoffs.

  • [A] great many investors are desperate to see Tesla's stock reach a much lower price soon, or they'll be forced to buy it at its present price in order to fulfill their short positions, potentially bankrupting many of them

    The reasoning behind the belief that Tesla is going to crash and burn is pretty solid: the company has been dependent on political favors for its success, it keeps generating losses, it has no significant technology advantage, Tesla's CEO is distracted by all sorts of other crap, it keeps

  • by hyades1 ( 1149581 ) <hyades1@hotmail.com> on Saturday June 09, 2018 @01:43PM (#56755930)

    Short sellers have always had a relationship with financial news media that worked well for both sides, but not so much for people who actually counted on those media for objective information. Short sellers plant a story about how Company X is experiencing some kind of problem. The media dutifully reproduce it with a minimum of fact checking...basically just ensuring that they aren't publishing outright lies. Company X's stock declines in value. Short sellers are happy. The financial news media write stories about how the "troubled company" is now struggling to survive, so they're happy because they get two stories for the price of one. The cycle is complete when those same short sellers vaccuum up the company's stock at a much-reduced price and suddenly it's once again a great place to invest.

    Everybody wins...well, everybody except honest investors.

    But this long-time tactic starts to fail when average investors become aware that they're being manipulated, and begin to question the timing of those planted stories. And maybe they start to doubt whether Company X's troubles are really bad enough to justify a stampede to sell. Add in an insanely rich company owner who delights in shoving a barbecue brush up the bum of short sellers and their news media enablers, and we have this situation. Finally, those of us who have watched helplessly as time after time Wall Street insiders profited by manipulating the system in a manner that is dishonest, if not illegal, can sit back and enjoy a good laugh.

    Yeah, if one or two of these guys decided to take the fastest route to street level, I'd be more than willing to award a score for the quality of their last, long dive.

  • by blind biker ( 1066130 ) on Saturday June 09, 2018 @02:58PM (#56756272) Journal

    Short selling creates a whole host of perverse motivations. It tempts people to do nasty and illegal things.

    I have a similarly dim view of high frequency trading, but that's a whole different can o' worms.

  • by BenJeremy ( 181303 ) on Saturday June 09, 2018 @03:28PM (#56756438)

    If they had shorted Tesla, they'd probably have lost even more.

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