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Short-Sellers Sue Tesla After Musk's 'Going Private' Tweets (bbc.co.uk)
An anonymous reader quotes the BBC:
Elon Musk's bombshell announcement that he is thinking of taking the electric car company Tesla private has landed him a lawsuit from unhappy investors.... His comments caused the share price to shoot up 11% to nearly $380, though it has since fallen back. Short-sellers, who bet on share price falls, allege he misled the market....
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
Short-sellers, who make a profit by borrowing shares, selling them and then buying them back at an expected lower price, claim to have lost millions thanks to Mr Musk's comments. Plaintiff Kalman Isaacs alleges the announcement was aimed at "completely decimating" short-sellers. His lawsuit, and another filed by William Chamberlain, accuse Mr Musk and Tesla of violating federal securities laws and artificially inflating Tesla's share price. Neither Mr Musk nor Tesla have commented on the lawsuit, which was filed in a federal court in San Francisco.
Tesla "is holding early discussions with banks about the feasibility and structure of a possible deal," Bloomberg reported yesterday -- and Ars Technica points out that if Mr. Isaacs had simply kept his short positions open through Friday, "he would be at least $60,000 richer."
But Isaacs' hopes to be the lead plaintiff for a class-action lawsuit "representing all Tesla shareholders who traded after Musk's tweet on Tuesday or at any time on Wednesday."
i made a investment and it didn't pan out. guess i'd better sue
Short sellers pissed off that the share price went up? let me see if I an find something small enough to hold the sympathy I feel for them.
SJW n. One who posts facts.
I would be laughed out of town.
This is a trick that Elon Musk can only pull once. If he doesn't take the company private, his move will be seen for what it was, a desperate attempt to shore up stock price by putting out the rumor that he was "thinking about" doing something.
If the company doesn't go private, those short-sellers will have their revenge. Consider: If you were thinking about taking a company private (which means buying up stock), would you make an announcement that will raise the price of the stock so you have to pay more?
Musk is trying to buy time for Tesla. That's cool, but he's skirting a fine line. It'll be interesting to see how this plays out, but I assure you there are people at the SEC looking into it.
You are welcome on my lawn.
The Tesla short sellers have been doing everything they can including fake announcements, generating rumours and harassing employees, suppliers and investors in order to hurt the share price of Tesla are now upset that Mr. Musk has said enough is enough?
Mimetics Inc. Twitter
Before everyone starts attacking short sellers, they actually provide checks and balances against bubbles and fraud.
https://www.investopedia.com/a...
https://money.usnews.com/inves...
they're basically our ruling class. Things you wouldn't think in a million years have laws do. And those laws have teeth and they are enforced. It's good to be the king.
Hi! I make Firefox Plug-ins. Check 'em out @ https://addons.mozilla.org/en-US/firefox/addon/youtube-mp3-podcaster/
Just can't stop thinking about how this played out... Musk: "I've been thinking about taking Tesla private" (yeah, if I could afford it.) andd... the stock price jumps for a bit and the short-sellers get thrown off. Ya know, every now and then we get dealt a really kick-ass hand and raise. Then that fool over there raises you and you're like "Yes!" next thing ya know you're all in. There was a reason they kept up with ya and you're left like... wtf Seriously? When you gamble even with the best hand you may just end up splitting the pot... Talk about some sore losers. Their like "What? You bluffed and we folded... Nope, nope we want our money back!" what a joke.
Do Colorless Green Ideas Sleep Furiously?
There's this big obvious income source coming for the company, an expensive factory being made that will make the next technology that everyone wants.
Without a disinformation campaign, folks would see that income source, and trade to match expected values, tempered for obvious risks, like failure rates and competition.
So, how do you turn this big, obvious market event in your favor?
You spread as much garbage about the company as you can. Headlines - headlines everywhere about everything you can get anyone to believe, that the company is fated for a giant fall. Get those stocks to as low a value as you can - then buy them, just before the actual numbers come back about a factory doing what a factory does.
So... the guy in charge of said factory decides to make the thing private, to prevent your strategy from working! Aw! All that work trashing the company, and you can't benefit from it! Such a loss of potential!
That's the market, as it is currently allowed to function. Folks using every piece of information as pivots to fool other investors.
The same thing is happening with Square Enix - about to release like 5 major games after working several years on each, and just releasing another major game now. What do the stories say about this, just before?
https://wccftech.com/square-en...
That's right - they emphasize the losses from making those games. They want those values low, low, low.
It's kind of a stupid way to value things, isn't it?
Ryan Fenton
I've given up trying to keep track of how many times I've seen the Musk haters say "Musk has screwed the pooch this time", "Musk has yet again promised and not delivered" or "Musk doesn't know what he's talking about" only to be proven wrong. If you're so sure that Musk does not have have a plan with investors lined up and has made the announcement without talking to tax attorneys and has placed himself in legal jeopardy could you put your money where your mouth is?
Mimetics Inc. Twitter
Musk has to keep the price above $360/share, otherwise he has to pay back bondholders $960M in cash by March 1st, 2019. Based on its current cash position and expected expenditures Tesla wont have the funds to pay bondholders back.
https://seekingalpha.com/article/4196101-elon-musk-desperately-needs-tesla-stock-stay-360
"Unhappy investors"? I'm not at all sure that short-sellers qualify as "investors".
"Pump and dump" tactics - buying a cheap stock, talking it up with false positive news stories and then selling it at a profit - are illegal. The reverse - selling a stock short and then making up lies about the company - should be equally illegal.
Prostitutes sue wealthy customers for the loss of virginity.
The shorts have borrowed shares and sold them. Their problem is they have to buy them back to return them and they were hoping the price would go down so they could pocket the difference. This isn't investment, it is parasitism. They gambled and the share price hasn't gone down, that's life.
Share prices rise and fall on all sorts of information and I don't think Musk would have said what he did without having the finance secured and his tweet was to alert all of his actual investors of what he was planning. Shorts aren't in on this, they don't have any shares.
"I have the attention span of a strobe lit goldfish, please get to the point quickly!"
That article is wrong based on the underlying linked SEC report on on the notes, either the author didn't read it properly or didn't expect their readers to read it properly. The note holder has the option to convert to stock until a couple days before maturity; the base conversion rate is 2.7788 per $1000 principal (which translates to about $360), but the conversion rate is increased depending upon the stock price given in table 9.03(e), with more shares given for stock prices at the cutoff of $252.54 per share. It gives the same breakeven point on the March 1, 2019 at the prices per share between $252.54 and $359.87.
The timing and reporting issues are listed in 9.01(b), for the listed major company changes (like liquidation) Tesla has to give notification at least 30 trading days in advance.
Frankly, that article set off by BS alarms causing me to look at the supporting material, since it sounded like this conversion was structured as a bonus to lenders if the stock price went really high, not as a way to dodge unforeseen financing trouble years ahead of time. The note holder captures upside to stock prices above $360 from the conversion. Presumably they structured it this way to improve how much money Tesla got up front for selling the notes in the 2013 or 2014 timeframe, and they were willing to trade away some of the upside if the price per share went above $360.
Short sellers, though in principle the practice is legitimate, are typically a crowd of get-rich-fast schemers. The primary reason they are short sellers is not that they honestly believe a company will go down or is overvalued, but that prices almost always go down faster than up. If you want to make money quickly, you go short. If you want to invest and make money in the long run, you go long. Wait, it's even called like that, what a surprise!
Lots and lots of them are in it for short-term profit which is why they have stop-loss orders in place to bail them out if the market goes the other way. And they are often in with leverage, so that they make 10 bucks on every point that the price moves. Which, of course, is also true if the price moves the other way. So their stop-loss orders are often much closer to the current price than it would be for investors who are quite ok with having some up and down movement, because they are looking at the company behind the price and don't care about today or tomorrow, they care about next quarter or next year.
So short sellers are a) make-money-fast guys and b) volatile to price changes going against them. With that, yes they lost millions, I easily believe that, because they probably bought at $350, set a stop-loss order at $360 and were leveraged 10:1 so that the $10 upwards swing lost them $100 per stock.
I so much hope the case finds a judge who understands the stock market and flat out tells them to not play in the kitchen if they can't stand the heat.
They would have been absolutely fine if they would not play with so much leverage that they need tight stop-losses.
Assorted stuff I do sometimes: Lemuria.org
Very few days over the past year has TSLA been above $360, so the way you have said it, it sounds like you are full of shit.
Are you sure you didnt mean to say something different? If not, why didnt you say what you meant?
Either very sloppy or very dishonest. Does it matter which you are?
"His name was James Damore."
The shorts weren't worse off than before the tweet... unless they were short so much that they got a margin call before the price came back down, in which case they deserve to lose for having such a massive position.