Tesla short sellers lose $1B

https://www.cnbc.com/2018/06/08/tesla-shares-to-pop-42-percent-as-model-3-profits-improve-with-musk-looking-to-china-analyst.html

by kerng • 8 years ago

56 74 8 years ago

cnbc.com

anoncoward1112• 8 years ago

The time to short was months ago, to be honest. Reversing the news is always a good strategy [1]

[1] unless it's news about Sears

std_throwaway5• 8 years ago

If there's enough money believing in the company the stock price doesn't really matter. They will hold as long as they believe the company has a chance to pay out (far) in the future. It's less a publicly traded stock and more a long term investment.

Xcelerate• 8 years ago

It's less a publicly traded stock and more a long term investment

I thought that was kind of the original point of stock.

anoncoward1112• 8 years ago

Your theory is partially correct. Let's say Tesla is 10x overvalued. If the dumb believers weren't holding the stock, it would be 1x. This, as you said, is correct-- they're propping up the stock.

However, Tesla isn't immune to short-term stocks. It will fluctuate between 5x and 10x overvalued, e.g, the stock should really be at $50 but is trading around 300-400.

I'd be very happy if I shorted Tesla at $370 or whatever its high price was.

std_throwaway5• 8 years ago

The market doesn't follow the news. The news follows the market. If it's on TV it's already too late.

sublimino• 8 years ago

Perhaps counterintuitively (in British English at least) the noun news is uncountable (e.g. referring to a mass rather than something that can be counted), and is singular in grammatical construction (so cannot be pluralised).

https://dictionary.cambridge.org/grammar/british-grammar/unc...

std_throwaway5• 8 years ago

Thanks.

drdeadringer• 8 years ago

If it's on TV it's already too late.

The same applies to when I hear about something from certain people. A part of me expects to hear about Columbus' "discovery" of America any century now from a few folks.

tim3332• 8 years ago

Well, it's too late to buy or sell the move they just reported but do many people do that?

anjc3• 8 years ago

It's still in the same downward channel

std_throwaway5• 8 years ago

The company itself seems to be in a downward spiral getting hit from multiple sides. To me it's unclear if they'll make it.

toomuchtodo11• 8 years ago

Can you provide a citation? If they make their 5k/week production target by the end of this month (which it looks like they will), they’re on their way to being cash flow positive, and also not needing another capital raise in the near term.

Challenges for sure, but “downward spiral”? Hyperbole.

n1231231231234• 8 years ago

maybe it's narrow minded, but for me, investing is all about giving a company mid- to longterm support so that they can expand their business. shorting is none of that. it doesn't create any value for society at large. if anything, it is, imv, close to professional gambling. but even gambling isn't this destructive. that's why i have zero empathy for those who lose money from shorting.

hsienmaneja• 8 years ago

Purchasing common stock after an offering (I.e. on the open market) doesn’t do anything to support a company, either. It’s essentially just paper being traded back and forth.

TheSoftwareGuy• 8 years ago

But having the ability to liquidize their stake at almost any time makes it easier for investors to put money into the company, and therefore gets more investors on board.

ndonnellan• 8 years ago

Unless the company needs to sell more stock or gives options/grants to employees. In either case, a higher price reduces the fraction of the company needed to be sold to get the same amount of cash. An increase is share price is almost always still beneficial to the company.

Areading314• 8 years ago

It creates a lot of value when short sellers discover that businesses are lying or cooking the books, see enron, worldcom, etc.

jampekka• 8 years ago

Buying stock on the market doesn't really support the company. After the initial sell of the stock it's just casino.

hinkley2• 8 years ago

How do you figure that?

If nobody buys the shares after the IPO then there is no demand and the market cap drops to zero. There’s no reward for the people who took the initial risk on the company and then what’s the point?

Ever heard of corporate raiding? A healthy stock price prevents hostile takeovers. It creates a class of emitionally invested citizens in the case of other external threats. It lets the public subsidize bonuses to employees (stock options) and in the case of a merger gives the company an asset that isn’t cash that can make up part of the compensation.

robbiep• 8 years ago

Short sellers are acting on data and a worldview that is also how the long buyers are thinking of. short sellers are always going to completely tank. And there's a reasonable chance that things will.

Regardless, there is a pretty strong argument to make that shorting is actually healthy for the economy because it leads to creative destruction

ptsch5• 8 years ago

Depending on the country and on the broker, investors who own the stock can profit substantially from lending out their holdings to short sellers. Unless of course you use one of those cheapest brokers or an index fund to “lower” your transaction costs - then the broker or the fund manager will lend out the stock which you own and pocket the entire profit.

So the response to the argument: investors support the company, short sellers support the investors.

seanmcdirmid• 8 years ago

A lot of investing involves hedging and capital preservation, making bets and various counterbets (including shorts) to make sure you probably won’t lose st the end of the day. Some of those shorts maybe were not speculative but counter bets, and the shorter didn’t actually lose money overall (though I couldn’t tell you what they were countering).

misja111• 8 years ago

Shorting a stock will lower its value (supply and demand) so that the supporters which you are talking about can more easily invest in their favourite companies.

agumonkey• 8 years ago

I may use the typical argument that whoever is smart enough to profit on short will make "good use" of it.

andrepd2• 8 years ago

Day trading is 95% luck, so we might as well apply that argument to roulette.

confiscate3• 8 years ago

one reason, that is not gambling, is insurance

e.g. for farmers, they can predict their harvest 5 months later, but can't know for sure.

They can short their own industry stocks. If the harvest goes good, they have crops to eat. If the harvest goes bad (e.g. forest fire), the short would net them some money.

http://www.theoptionsguide.com/short-hedge.aspx

mpfundstein2• 8 years ago

Futures are provably a better vehicle for that, aren’t they?

anjc3• 8 years ago

It sounds like you're describing something more like loans, than a market. Short sellers increase market liquidity, and help with price discovery. There's no destruction. This is a good thing, especially for a mega-hyped but under-delivering stock like Tesla.

stevievee4• 8 years ago

Do not bet against Tesla unless you are a professional. Tesla has incredible PR and Finance departments with background proponents holding enough capital to help them through rough patches. Side note, their Q2 2013 is still one of my favorite Finance/PR plays in recent memory.

confiscate3• 8 years ago

what happened in Q2 2013? sorry I did not follow news about Tesla until later

stevievee4• 8 years ago

They used stock issuance to repay their government loan and the only headlines the public saw was "Tesla repays government loan early!" leaving stock price a net gain after the issuance

freerobby2• 8 years ago

Agree with the conclusion, disagree with the reasoning.

In the end, good products and strategies win. Betting against Tesla is dumb because they've proven the doubters wrong about their products and strategies over and over again. They've stayed right on course with the ten-year plan they laid out ten years ago, and every product they've built has been loved by an overwhelming majority of its owners. Not many companies can say that, not even successful ones.

Short sellers need to tip their caps and recognize that Tesla understands what it's doing better than they do. The longer it takes them to realize this, the more money they're going to lose.

stevievee4• 8 years ago

They have yet to prove any of the doubters wrong with regard to the model 3, sorry. Also, the stock is not traded on fundamentals as much as you or the rest of the public believes.

iblaine• 8 years ago

Reminds me of Bill Ackman's bet against Herbalife.

astrodev• 8 years ago

Is this the "short burn of the century" that Musk predicted at the beginning of May? (https://twitter.com/elonmusk/status/992388944774938626)

toomuchtodo11• 8 years ago

It’s the beginnings of it. Keep an eye on the price of deep out of the money calls on TSLA between $340-$380 to see what the market is predicting as we get closer to the next earnings call.

marketgod4• 8 years ago

We need to break $330~ on TSLA with power

marketgod4• 8 years ago

SPY is going to $300 this year.

Jugurtha2• 8 years ago

Can people in finance and analysts start using stagger charts[0], please? Making predictions and not keeping score of predictions is useless. That's exactly what tarot readers do.

In the left column the months (or years or days) you make the predictions in. Top months are the months you're making the predictions for. The trace (R) is the actual real value (forecast of January in January, i.e: you have the number).

So:

The forecast for October made in January is 22.

The forecast for October made in June is 13.

The forecast for October made in September is 42.

This way, we can track all forecasts and track errors. The chart has memory. The chart cuts through bullshit.

        J   F   M   A   M   J   J   A   S   O   N   D

  J     R   12  13  14  53  12  21  34  19  20  22  19
  F     -   R   14  13  51  10  20  30  17  22  24  15
  M     -   -   R   51  11  27  35  19  20  21  19  12
  A     -   -   -   R   55  17  20  32  18  21  28  19
  M     -   -   -   -   R   73  42  11  34  17  23  12
  J     -   -   -   -   -   R   61  21  67  13  22  82
  J     -   -   -   -   -   -   R   42  11  34  17  23
  A     -   -   -   -   -   -   -   R   42  11  34  17
  S     -   -   -   -   -   -   -   -   R   42  11  34
  O     -   -   -   -   -   -   -   -   -   R   42  11
  N     -   -   -   -   -   -   -   -   -   -   R   12
  D     -   -   -   -   -   -   -   -   -   -   -   R

[0]: High Output Management - Andrew Grove

Jugurtha2• 8 years ago

The forecast for October made in January is 20. Sorry.

tim3332• 8 years ago

Making predictions and not keeping score of predictions is useless.

Perhaps but I think you may misunderstand how these things work. "Nomura Instinet advising clients that the electric car maker's shares could rally 42 percent over the next year." is a sales pitch for people to become clients of Nomura and trade stuff. They have no interest in any one keeping score of their predictions. It's like "England may win the FA cup, place your bets with Ladbrokes" - not really about testability.

Tesla short sellers lose $1B

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