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Tesla Short-Sellers Lose $1 Billion (cnbc.com)
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..."
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..."
I wish you well Mr. Musk. You have inspired many people, and you surely have integrity in this world of Wall Street defeatists.
great headline guys..
How is the stock market different from the betting/gambling market.
http://archive.is/WdAq6
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.
It does not matter what the stock price was a 12 months ago, short stocks have to buy the stock back when there is demand. It is like gambling, you borrow someones else's shares and hope the price will go down enough that you can buy it back. If the price does not go down, eventually they are going to have to buy it for something they did not want to pay.
The gambling part is when and how much you will have to buy it back for. They could just buy it back early, but they they wait until the market determines that they have to buy it back and it is usually when the price is much higher than they expected and puts them into a hole.
They really should outlaw short positions, it is just another way to gamble for financial institutions .
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 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*.
potentially bankrupting many of them and sending some out of the windows of Wall Street skyscrapers
And nothing of value was lost.
No sig today...
Shorts are considered far more dangerous than longs, there is potential to lose vastly more money from shorts. So don't think the two are the same. Shorts are very dangerous.
I'm not particularly bullish on Tesla, but even I don't think you can call it until it actually goes belly up.
He has, like 500,000 Model 3 cars on back-order. That's $2.5 billion+ in orders. Production is ramping up.
Meanwhile he's still selling as many Model S and Model X as he can possibly build (remember those?).
Only a complete idiot would be shorting Tesla right now.
No sig today...
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.
love is just extroverted narcissism
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?
Found the short seller!
Which is why short sellers are generally a lot better informed than long buyers
You misspelled "degenerate gamblers" there.
Being risk-prone does NOT guarantee nor even imply risk-awareness.
In fact, it generally correlates with various mind-debilitating addictions - from adrenaline to cocaine.
Mit der Dummheit kämpfen Götter selbst vergebens
I"m not the GP, but in my opinion, the problem with short selling is this: you're selling something you do not own, akin to selling the Eiffel Tower or the Brooklyn Bridge. Yes, I know it's a bit more complicated than that when you bring things like futures into it, but for stocks, it's straight up fraudulent. Legal, sure, but fraudulent nonetheless. (So is fractional or no reserve lending, by the way. Lending money you do not possess is no better and that is the cornerstone of fractional reserve.)
If it works in theory, try something else in practice.
Tesla may very well become profitable. Maybe not, maybe so.
The current stock price has Tesla valued as already being the world's biggest car company. They aren't even in the top ten. Buying Tesla stock isn't a bet that the company will survive. To make money long time Tesla has to become bigger and more profitable than any car company ever has.
Shorting Tesla will (eventually) make money if Tesla becomes as large and successful as General Motors or Toyota, because the current price is justified only for a company much bigger than Toyota.
I would definitely short Tesla if I didn't have my funds tied up in another investment, because even if Tesla does remarkably well, shorts will still make money. Long term, shorts can only lose if Tesla is among the most successful companies ever. While Musk is great at publicity, the evidence suggests operations management at Tesla isn't even good, much less record-breaking incredible.
Clue: It's not because they don't want the cars, it's because the waiting list is so long at the moment.
Bottom line: Tesla can guarantee to sell every car he produces for at least the next five years, more like ten years in reality.
At the end of it he'll have the biggest/best battery factory and the coolest car technology. Any bets on how many pre-orders he'll get for the generation after this one?
No sig today...
Shorts, as demonstrated over the past couple decades, rely on spreading lies to realize their profits.
If any company is really over-valued, then competitors should be able to compete with them directly by bringing better products to market, and realize profits that way.
Anything sown from a sea of lie should be avoided, watching the ax fall on those of prefer lies is immensely satisfying
When you short a stock, you have to post the money into a margin account to buy it back (slightly more as you will have to have enough to cover any expected movement in the short term before your position can be closed)
As the price rises, you have to add more and more money to your margin account. Eventually you run out of money and if you cannot post the new margin for the next day, your broker will use the money in your margin account to close your short position.
If the shares move too rapidly and unexpectedly, your broker might not be able to close out your position using the margin account and you're fucked. If it's a big enough movement, your broker is fucked too as they're on the hook if you go bankrupt.
God said, "div D = rho, div B = 0, curl E = -@B/@t, curl H = J + @D/@t," and there was light.
They really should outlaw short positions
No they shouldn't. Shorties provide a valuable check on inflated prices and help to root out corruption and fraud. Muddy Waters is a well known shorty. They investigate public companies, looking for inflated stock prices based on accounting fraud or other corrupt practices. If they uncover malfeasance, they take a short position, and then publicize their findings, driving down the price and reaping a profit. This prevents a much bigger crash that would occur if the fraud was able to continue.
Muddy Waters has been especially successful shorting Chinese companies listed in America on the NYSE and NASDAQ.
Go see the movie "The Big Short". Front Point Partners and others made a lot of money shorting the housing market, but the bubble, and ensuing crash, would have been much smaller if more people shorted it, and did so earlier.
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.
The smart move is out of the money put options.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
The market can stay irrational longer than you can stay liquid.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Yes. But that's true with all gambling.
No it isn't. If I bet $10 at the blackjack table, the most I can lose is $10. So no deep pockets are needed.
With a short, there is no loss limit. The 2008 VW short squeeze resulted in ten of billions in losses, and bankrupted many investors.
Investors shorting Alibaba have lost over $16B.
Actually, there are many ppl here that back musk. In fact, I would guess that the majority of us that worked Linux and had to deal with the fud from ppl like you , back him. So it could be rei or any number of none trolls.
I prefer the "u" in honour as it seems to be missing these days.
Tesla's stock is down 12% in the last 12 months in a strongly up market.
Ah, yes. Let's take an arbitrary time period and build an argument around that. Let me try:
Tesla's stock is up 10% in the last 2 months...
Tesla's stock is up 48% in the last 24 months...
I'm a leaf on the wind. Watch how I soar.
Since when do I submit news anonymously?
Anyway, if anyone here is short TSLA and is trying to understand what the market is thinking, this summary explains everything.
Jesus: "Son of a
You're making one huge assumption here, namely that stock price is directly linked to how big or successful a company is.
It isn't. There is no such connection at all. The only thing determining a stock price is how much people are prepared to pay. That's *it*.
So unless Tesla goes under, the stocks will be worth what people are prepared to pay for them. And unless you have a set of mind-control orbital satellites which can make people sane and rational when determining what they will pay for stocks, there is absolutely no guarantee a short on Tesla will pay off, even if they remain a tiny company.
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.
I've calculated my velocity with such exquisite precision that I have no idea where I am.
Again, anyone who shorts a stock can cut his losses any moment he wants by re-buying the stock he sold at whatever the current price is that moment.
The current price is nothing but the value of the *last* sale that was done. There is absolutely no guarantee that you can buy back your shares for that price. It all depends on the order book and the amount of shares you wish to buy.
Nice theory, now look up 'naked short'.
Market makers assume risk, but they choose to assume risk, they can cover as easily as anyone.
Out of the money put options. Limited risk, unlimited upside. Market knowledge can be extracted from the option premiums (the price paid upfront) if thickly traded.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
Yes, I assume that EVENTUALLY people will tire of handing money to Musk for him to lose, that eventually the hype will wear off. The difficult part is determining WHEN that will happen. It may be a long time. More likely, I think, Tesla will make a major mistake or release very bad news in the next couple of years, and the hype will have begun to want, so a measure of sanity will return.
I would get a put option on Tesla, but an option typically expires in a month. Tesla stock could very well go up in the next 30 days. In the next ten years, it's almost certain to go down.
Again I'm not saying that Tesla can't possibly be successful. I'm pointing out that the current stock price assumes they'll be more successful than Toyota, Honda, GM, or Ford. If Tesla becomes as successful as Toyota, today's investors will have overpaid.
While it is a mistake to outlaw shorts, I would have no problem with limiting shorts to institutional players, or anybody with the money to cover up to say 10x or even 100x, what you bet. I'm guessing that many shorts here can not cover what is coming shortly.
I prefer the "u" in honour as it seems to be missing these days.
Again, anyone who shorts a stock can cut his losses any moment he wants by re-buying the stock
Do you understand how stock markets work? Do you think a high frequency trader is going to give you a courtesy call before placing a buy order that will push the price beyond your ability to pay?
In 2008 20% of VW shares were owned by the government of Lower Saxony. 74% were owned by the Porsche family and corporation. 13% of shares were shorted. When Porsche publicized their position, the shorties needed to buy more than 80% of the other shares to cover their position, which is completely implausible, especially since these other stockholders had NO reason to sell since the share price was obviously going to skyrocket (it subsequently quintupled).
Not really. Lets say you short Acme (trading at $10) today. Right now, you have no idea how much you stand to lose. Their stock probably won't double tomorrow, but unlike a fixed wager, you can't say so with absolute certainty.
Now, tomorrow, sure enough, it doesn't double. But it does go up to $15. Can you get out before the bleeding gets worse? Maybe. But now you're buying when everyone is buying. If you have shorted 1 share, sure, you can get out. Now try buying a signifivcant number of shares. That's right, your attempt to buy sends the price higher. How much higher? Who knows.
Now the kicker. If a lot of people shorted Acme, you may not actually be able to find enough willing sellers. Sure, you will eventually, but how much will you have to pay? Who knows!
In contrast, if I bet $10 in Blackjack, I can tell you to the penny exactly how much I might potentially lose. There is nothing that can make that amount any higher than that expectation.
That's between them and their brokers, isn't it?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
This is perhaps the most insightful comment ever posted on Slashdot.
Nothing posted to
Yeah. At least when I had brokerage account, you couldn't take short positions unless you had a margin account. Short positions were limited by margin limits; anybody trading with a fear of margin call is not, well, playing a game they are going to be playing for long.
Perhaps he misread "Powertrain" as "Poettering"?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
It's not irrational. People who profit from other's misfortunes tend to eventually start CAUSING other's misfortunes so they can profit from them.
Apparently you don't know what the word "started" means. "Started at the end of February".
Short interest had been around 29M for the previous year. But starting at the end of February, it surged, up to around 39M.
Which would be relevant if we were talking about a steady-state, dividend-paying company, rather than a company growing by orders of magnitude. You want earnings on a growing company to be as low as it can bear, because you want every cent they can get their hands on going into expansion. Check out Amazon in 2015.
Further reading: How can the price-to-earnings (P/E) ratio mislead investors? (article has nothing to do with Tesla, just discusses P/E in general, and how it's commonly misused - in exactly the way you're doing it).
Jesus: "Son of a
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.
"The agriculture ministry is not in charge of Gundam" - Japanese ministry official.
Leveraged people attach credit lines to their margin accounts.
And when that credit is maxed out???
"Those that start by burning books, will end by burning men."
If they had shorted Tesla, they'd probably have lost even more.
The smart money who sorted Tesla have decided to cut their loses and have already bought enough stock to cover their short positions, only the pathological-gambler-in-denial type of investor will wait to break even 'till the end. Also, how do you plan to codify in law a ban on short selling that cannot be circumvented trivially and can be enforced? Many lawmakers have tried and failed.
No they didn't. There were more than 40 million shares shorted. At average daily volume (7M a day for TSLA) that's over a week of nothing but buying from short sellers to exit. So in reality it will take more than a month to unwind those positions and to do so at that rate would cause the price to spike by a very large amount (by increasing the buying interest over that period). The shorts are still very far in and very much in a bad position. In fact, to defend the $325 price on Thursday, its likely they had to get in even deeper in new positions (to replace short positions that were stopped out between $315 and $325) as the price was spiking at that point and a large volume of (apparently institutional) sales pushed the price lower before close on Thursday. While we won't know if those were new shorts or longs getting out for two weeks (till the block trade reports for this week are released), its a reasonable assumption to think they were new shorts as they looked to be large, institutional trades (and not many smaller trades which would indicate profit taking by long, retail investors).
"Those that start by burning books, will end by burning men."
All that you're saying is ways to limit the damage, but none of it suggests a way to KNOW what the worst case might be. It's still non-deterministic, kinda like you can avoid going on a picnic when the forecast is for rain, and you can pack up quickly and run for the car if conditions suggest that the forecast is wrong, but you can't be 100% certain you won't get rained on. Such is the nature of the beast.
I did check the numbers. The surge in short interest, up to ~39M, started at the end of February, mainly picking up in March. It was relatively constant (27-29m) before that.
Your premise is false.
Sorry that your cries of doom and gloom didn't pan out. Better luck next time.
Jesus: "Son of a
It does if that's when they shorted the stock. If you want to say they lost a billion dollars, the change in price of shares times the number of shares shorted has to be a billion dollars If the stock moved down between when they sold and bought the stock back, they've made money.
*Fees and interest complicate things
But they didn't. Most of the current set of short positions were opened about 3 months ago when the idea was floated by hedge fund managers at an investment conference in NYC. At that point, TSLA was trading between $275 and $305 most of the time. So those are the price ranges in which most of those positions were opened. Its trading over $315 now in a range that likely is between $305 and $325 or $330.
"Those that start by burning books, will end by burning men."
Sure, and I can get a locking gas cap for my car, but it doesn't make "borrowing" a couple gallons of gas from my tank at 3AM right, even if you do put it back tomorrow.
There are several technology transformations under way, which collectively represent trillions of dollars of economic activity:
1. ICE cars & semi-trucks transitioning to EVs
2. Carbon-based fuels transitioning to renewable energy (solar/wind)
3. Self-driving cars & self-driving semi-trucks
Guess who is at the forefront of all 3?
And both #1 & #2 create a gigantic demand for batteries (portable & utility). Guess who has a gigantic battery factory and is aggressively building more? If you own a Tesla car, who are you going to buy your solar roof & home battery setup from?
This is the problem with Tesla skeptics. You think of Tesla as a scrappy little car company for tree-huggers, when in fact it is the best-positioned company in the world. Tesla is Apple in 2007, the Model 3 is the first iPhone.
Enjoy your Zune.
This requires that you believe that SpaceX selling rocket launches to the government for half of what they would have otherwise paid is somehow a "government handout". Learn how to read, and then learn how to read critically. Care about the the truth, it really does matter.
You can't have legal fraud
Of course you can; just off the top of my head, I can think of several including politics and religion.
... or theres some company-specific event causing serious pressure, its not going to move that fast.
There are "company specific events" EVERYDAY. If Tesla releases a statement that their sales bumped up, or their costs fell, or that they just brought a fully automated assembly line online, the HFTers will respond and push up the price in milliseconds. They don't even wait for a human to read the report. They have text analysis programs (written in compiled languages, not interpreted) scan the report for key words and phrases, and then automatically trigger trades.
Your claim that stock prices only move slowly and smoothly is absurd.
... or if it happened overnight he bought into overly volatile stock
"Volatile" is a description of a stock's HISTORY, not its future. You have no way of knowing the future.
Can you guess what was one of the least volatile stocks back in 2008? Volkswagen. Rock stable industrial firm, with hard assets and steady predictable profts. Then out of the blue it skyrocketed in price in a few SECONDS, bankrupting several financial institutions holding short positions.
"Monitoring a spreadsheet" would have done nothing for them.
I also control the British crown and keep the metric system down.
Jesus: "Son of a
If you need "Stock market police" then get the government to do it
Because the SEC did such a superb job regulating CDOs back in 2007?
... rather than a business as the business is in the business of profit.
That means they have skin in the game, and a strong incentive to get it right.
Re giving money to Musk, while Tesla has been losing money, investors' money, Musk's personal fortune has been increasing by $1 billion each year. Where do you think that money is coming from?
The same accounting that says Bill Gates is worth $93.4 billion. Just like Bill, the vast majority of Elon Musk's net worth is balance sheet money, based on the nominal market price of Tesla stock and the even flimsier notional value of SpaceX after their most recent round of private financing. It's not like he's squirreling money away in a mattress somewhere. Just like Bill, his cash worth is substantially less than that, as Tesla's stock especially would plummet if he tried to liquidate 100% of his holdings tomorrow.
Net worth of billionaires is largely fictional from the household money man-on-the-street perspective.