7 ms·

Every budding short seller needs to, at some point in their career, learn the lesson of never shorting a growth tech stock.

jonknee 10y ago
Or to confuse Tesla with a tech company.
- bredren 10y ago
  What kind of company would you call it?
  - sah2ed 10y ago
    A battery/renewable energy company.
    - reilly3000 10y ago
      I think the key distinction is hard costs. Tech companies have server costs. Tesla has manufacturing and contractor expenses.
      - jonknee 10y ago
        Exactly. Tesla is a tech company like GE is a tech company. It's modern manufacturing. (This only matters for valuation sake, a classic tech play can achieve profit margins far higher than a manufacturing firm.)
      - lightbyte 10y ago
        Tesla has plenty of server architecture, their cars are constantly talking to it for data collection and updates.
      - Someone 10y ago
        The word "tech" apparently has changed meaning in some circles. https://en.wikipedia.org/wiki/Technology https://en.wikipedia.org/wiki/Technology: "Technology ("science of craft", from Greek τέχνη, techne, "art, skill, cunning of hand"; and -λογία, -logia) is the collection of techniques, skills, methods and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation. Technology can be the knowledge of techniques, processes, and the like, or it can be embedded in machines which can be operated without detailed knowledge of their workings." You can argue that that isn't accurate, but I don't see how you can argue that the categorical statement "tech companies have server costs" follows from it (I can't even find the word "server" on that page, or on https://en.wikipedia.org/wiki/Tech https://en.wikipedia.org/wiki/Tech)
    - olivermarks 10y ago
      I thought panasonic was their white label battery supplier/partner?
      - sah2ed 10y ago
        Yes, but even they can't keep up with the projected demand for batteries which is why Tesla is building out its own factory [1] in partnership with Panasonic [2] to manufacture batteries. [1] https://www.tesla.com/gigafactory https://www.tesla.com/gigafactory [2] https://www.tesla.com/blog/panasonic-and-tesla-sign-agreement-gigafactory https://www.tesla.com/blog/panasonic-and-tesla-sign-agreemen...
  - jonknee 10y ago
    Every company these days is a tech company in some respects, but I don't think Tesla fits the bill in the general sense. Tesla is a green energy manufacturing company. The only reason I think this matters is their finances are a lot different than a tech company. You are correct that Tesla is currently priced like a tech company though, so maybe I'm way off!
    - debaserab2 10y ago
      ..so what is a tech company then?
    - deleted 10y ago
      [deleted]
  - tenpies 10y ago
    TSLA behaves mostly like 3 X Musk Tweets Bull ETF.
    - elastic_church 10y ago
      Now now, don't give Direxion any ideas
  - xadhominemx 10y ago
    A car company.
- netule 10y ago
  They changed their name this year from Tesla Motors to Tesla Inc. to indicate a wider focus on technologies, not just cars (solar panels, batteries). How do they not qualify as a tech company?
  - jonknee 10y ago
    They changed their name because they bought Elon's solar company (which was also not a tech company).
    - Cerium 10y ago
      I'm curious about what you would consider a tech company. For me a tech company is any company that uses the development of technology as a competitive advantage. Solar is not, major solar companies are not developing innovative technology. Tesla is, they do not have an advantage in scale or low prices, but have advantage in how their vehicles function.
      - deleted 10y ago
        [deleted]
      - greglindahl 10y ago
        So you don't think that 3d printing solar roof tiles is innovative solar technology? I don't think anyone else is talking about that.
        vkou 10y ago
        Is 3d-printing car parts an innovative technology? Is Ford now a tech company? [1] [1] https://techcrunch.com/2017/03/05/ford-begins-testing-3d-printing-large-car-parts-for-cost-effective-customization/ https://techcrunch.com/2017/03/05/ford-begins-testing-3d-pri...
      - dkrich 10y ago
        For me a tech company is any company that uses the development of technology as a competitive advantage. So then is Ford a tech company? If not, then I'd be interested to hear why not, based on that criteria. Their cars are technology and they continuously develop and improve them as a competitive advantage. I think people think of Tesla as a tech company because the founder is Elon Musk. If Tesla were a spin-off brand of GM or Ford, it would be another car company.
- lanna 10y ago
  you seem to have a very narrow understanding of what technology means. computers are not the only "technology" in the world.
mayukh 10y ago
Rather needs to understand how to have a basket of shorts and manage risk as opposed to shorting single names.
GCA10 10y ago
Yes. Short-selling pioneer Bob Wilson nailed the key insight on these situations. They are "manana stocks," Wilson declared, way back in the 1970s. Their valuation is premised on the notion that something wonderful will happen in the future. Time horizons keep being pushed out, but the stocks' fans don't mind. Shorts can get very cranky and righteous about each little bit of slippage. But as long as new enthusiasts keep showing up, and old ones feel lenient, it's hopeless to insist on strict accountability. Even a short-lived burst of optimism is sufficient to arrange more funding, so manana always seems within reach. Worst case: you're shorting Amazon. The bulls were right, and you go broke. Best case: you're shorting something like Energy Conversion Devices, which eventually did run out of money and file for Chapter 11 in 2012. Shorts had been predicting its demise since the 1970s. That is a long time to wait.
- kornish 10y ago
  "The market can stay irrational longer than you can stay solvent." – John Maynard Keynes
- clock_tower 10y ago
  Best case: you're shorting Sun Microsystems at the beginning of 2000, and it goes from $300/share to $3/share in the next 3 years. (http://www.1stock1.com/1stock1_211.htm http://www.1stock1.com/1stock1_211.htm) My advice is to just not touch tech stocks; going short on them is just as dangerous as going long.
  - marvin 10y ago
    Even the best case wouldn't have you more than double your money, if you put up 1:1 collateral. I guess you could have less collateral than this, but in that case, given a growth stock, you would be wiped out if there was a modest increase. I don't see the risk/reward curve for long-term shorting.
    - mortehu 10y ago
      When the price starts dropping, you would have to sell more shares to maintain a 1:1 ratio. For example, you can double the number of shares each time the price drops by half, and make up to 200%.

jonknee 10y ago

Or to confuse Tesla with a tech company.

bredren 10y ago
What kind of company would you call it?
- sah2ed 10y ago
  A battery/renewable energy company.
  - reilly3000 10y ago
    I think the key distinction is hard costs. Tech companies have server costs. Tesla has manufacturing and contractor expenses.
    - jonknee 10y ago
      Exactly. Tesla is a tech company like GE is a tech company. It's modern manufacturing. (This only matters for valuation sake, a classic tech play can achieve profit margins far higher than a manufacturing firm.)
    - lightbyte 10y ago
      Tesla has plenty of server architecture, their cars are constantly talking to it for data collection and updates.
    - Someone 10y ago
      The word "tech" apparently has changed meaning in some circles. https://en.wikipedia.org/wiki/Technology https://en.wikipedia.org/wiki/Technology: "Technology ("science of craft", from Greek τέχνη, techne, "art, skill, cunning of hand"; and -λογία, -logia) is the collection of techniques, skills, methods and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation. Technology can be the knowledge of techniques, processes, and the like, or it can be embedded in machines which can be operated without detailed knowledge of their workings." You can argue that that isn't accurate, but I don't see how you can argue that the categorical statement "tech companies have server costs" follows from it (I can't even find the word "server" on that page, or on https://en.wikipedia.org/wiki/Tech https://en.wikipedia.org/wiki/Tech)
  - olivermarks 10y ago
    I thought panasonic was their white label battery supplier/partner?
    - sah2ed 10y ago
      Yes, but even they can't keep up with the projected demand for batteries which is why Tesla is building out its own factory [1] in partnership with Panasonic [2] to manufacture batteries. [1] https://www.tesla.com/gigafactory https://www.tesla.com/gigafactory [2] https://www.tesla.com/blog/panasonic-and-tesla-sign-agreement-gigafactory https://www.tesla.com/blog/panasonic-and-tesla-sign-agreemen...
- jonknee 10y ago
  Every company these days is a tech company in some respects, but I don't think Tesla fits the bill in the general sense. Tesla is a green energy manufacturing company. The only reason I think this matters is their finances are a lot different than a tech company. You are correct that Tesla is currently priced like a tech company though, so maybe I'm way off!
  - debaserab2 10y ago
    ..so what is a tech company then?
  - deleted 10y ago
    [deleted]
- tenpies 10y ago
  TSLA behaves mostly like 3 X Musk Tweets Bull ETF.
  - elastic_church 10y ago
    Now now, don't give Direxion any ideas
- xadhominemx 10y ago
  A car company.
netule 10y ago
They changed their name this year from Tesla Motors to Tesla Inc. to indicate a wider focus on technologies, not just cars (solar panels, batteries). How do they not qualify as a tech company?
- jonknee 10y ago
  They changed their name because they bought Elon's solar company (which was also not a tech company).
  - Cerium 10y ago
    I'm curious about what you would consider a tech company. For me a tech company is any company that uses the development of technology as a competitive advantage. Solar is not, major solar companies are not developing innovative technology. Tesla is, they do not have an advantage in scale or low prices, but have advantage in how their vehicles function.
    - deleted 10y ago
      [deleted]
    - greglindahl 10y ago
      So you don't think that 3d printing solar roof tiles is innovative solar technology? I don't think anyone else is talking about that.
      - vkou 10y ago
        Is 3d-printing car parts an innovative technology? Is Ford now a tech company? [1] [1] https://techcrunch.com/2017/03/05/ford-begins-testing-3d-printing-large-car-parts-for-cost-effective-customization/ https://techcrunch.com/2017/03/05/ford-begins-testing-3d-pri...
    - dkrich 10y ago
      For me a tech company is any company that uses the development of technology as a competitive advantage. So then is Ford a tech company? If not, then I'd be interested to hear why not, based on that criteria. Their cars are technology and they continuously develop and improve them as a competitive advantage. I think people think of Tesla as a tech company because the founder is Elon Musk. If Tesla were a spin-off brand of GM or Ford, it would be another car company.
lanna 10y ago
you seem to have a very narrow understanding of what technology means. computers are not the only "technology" in the world.

mayukh 10y ago

Rather needs to understand how to have a basket of shorts and manage risk as opposed to shorting single names.

GCA10 10y ago

Yes. Short-selling pioneer Bob Wilson nailed the key insight on these situations. They are "manana stocks," Wilson declared, way back in the 1970s. Their valuation is premised on the notion that something wonderful will happen in the future. Time horizons keep being pushed out, but the stocks' fans don't mind. Shorts can get very cranky and righteous about each little bit of slippage. But as long as new enthusiasts keep showing up, and old ones feel lenient, it's hopeless to insist on strict accountability. Even a short-lived burst of optimism is sufficient to arrange more funding, so manana always seems within reach. Worst case: you're shorting Amazon. The bulls were right, and you go broke. Best case: you're shorting something like Energy Conversion Devices, which eventually did run out of money and file for Chapter 11 in 2012. Shorts had been predicting its demise since the 1970s. That is a long time to wait.

kornish 10y ago
"The market can stay irrational longer than you can stay solvent." – John Maynard Keynes
clock_tower 10y ago
Best case: you're shorting Sun Microsystems at the beginning of 2000, and it goes from $300/share to $3/share in the next 3 years. (http://www.1stock1.com/1stock1_211.htm http://www.1stock1.com/1stock1_211.htm) My advice is to just not touch tech stocks; going short on them is just as dangerous as going long.
- marvin 10y ago
  Even the best case wouldn't have you more than double your money, if you put up 1:1 collateral. I guess you could have less collateral than this, but in that case, given a growth stock, you would be wiped out if there was a modest increase. I don't see the risk/reward curve for long-term shorting.
  - mortehu 10y ago
    When the price starts dropping, you would have to sell more shares to maintain a 1:1 ratio. For example, you can double the number of shares each time the price drops by half, and make up to 200%.