10 ms·

Tesla short sellers $2B in the red for June as shares soar

86 points by antman 8y ago

kolbe 8y ago
That's a lot if they're talking about truly naked shorts. The only way I can see a number like this and think it's not a complete disaster is that these aren't really naked shorts. I can certainly see a situation where the natural longs that TSLA employees have via options and RSUs can get hedged secretly though a bank, and that shows up as a short in the market.
- bjl 8y ago
  A lot of the shorts are probably long the broader market (which vastly overperformed compared to TSLA over the last few years), which makes these kind of fluctuations much easier to stomach.
- MediumD 8y ago
  Most companies that I know of have a policy preventing employees from shorting/hedging their company's stock. I imagine virtually none of the shorts belong to current Tesla employees.
- CydeWeys 8y ago
  It's a pretty typical provision in employment contracts that you aren't allowed to bet against the stock of your employer. I'd be surprised if any meaningful percentage of Tesla employees were shorting their own company.
  - kolbe 8y ago
    Hence my use of the word 'secretly'. Also, it would only take one particular rich/narcissistic employee to make up all of it if he wanted to secure a few billion dollars of his net worth for the future.
tejohnso 8y ago
I shorted (a very small amount) from about $320 down to about $270. That's when Elon had his very standoffish and defiant earnings call. After that I exited at a profit because I didn't think the downward reaction was severe enough. People were asking legitimate questions about orders and finances and he told them to shut up, while directly insulting their intelligence. That was an extremely bad sign to me. When I saw that even after that, there was still support in the $270s, I declared the market too bullish for my liking and was no longer comfortable being short. As far as I'm concerned TSLA has to turn a profit in the next couple of quarters or they're just not going to be able to be competitive enough with the additional financing they're going to require. Elon promises they won't need to raise capital. If he's right, great. But I'm not betting on it one way or the other.
- ggm 8y ago
  You're telling two stories. One is, that you have antipathies to the CEO because he behaves badly. Well, thats market-effecting, so its information you can (and did) use to inform your investment decisions. But, its a short-term investment process. This doesn't really inform deliverables in the medium to long term, or the fundamentals of the company. The second story is structural debt burden and the effect on profitability. I am not an economist, but I think you may have over-stated this. I think it would be a mistake to make investment decisions based on your information, absent clear signals from people who ARE economists about the effect on short, medium and longterm investment outcomes. If (as I suspect) you are looking for short term profits, well and good, you can use this rationally to say "dispationately I don't think I can see a return on my investment by value gain or dividend, so I won't invest" But if somebody is a non-dispassionate investor, in for the medium to long term because of a belief building the EV market has wider outcomes which WILL raise their stock value, or return dividends, then this debt burden is a risk-side decision: Is the risk of a problem sufficient to outweigh the chance of the upside in the longer term?
- kjksf 8y ago
  GM just had their annual meeting for shareholders. They said they'll increase production of Bolt but refused to say by how much and by when. In contrast, Tesla lays out their future plans months, sometimes years in advance. Tone aside, it seems to me that Tesla is being measured here by a completely different stick. Compared to all other public companies they provide vastly more "legitimate" information. Just for a few examples of "legitimate" questions that well known companies refuse to answer, even if politely: * GM won't tell you any details about future plans for Bolt and other EVs. Tesla: "we'll make 10k by end of 2018". GM: we'll increase production, don't ask us when or by how much" * Amazon only recently disclosed number of Prime subscribers, and only total number, not breaking down e.g. US from international * Netflix won't tell shareholders viewing numbers for any of their shows I could go on talking about information that companies don't share. It's just bizarre that people expect Tesla will just disclose anything that's asked.
zeusk 8y ago
That's not how shorting works. Most short positions are pairs trade to offset a long position elsewhere, and TSLA is a favorite punch bag for the wall street (crappy financials).
lrn 8y ago
Worth noting that Elon just purchased 72,000 TSLA shares worth $24,000,000 (purchased June 12 & 13).
- SimbaOnSteroids 8y ago
  Preferred or common shares because those are two different signals.
  - kornish 8y ago
    Common, I believe.
  - jeff18 8y ago
    Common: https://www.reuters.com/article/us-tesla-musk/elon-musk-buys-72500-of-tesla-shares-idUSKBN1J930L https://www.reuters.com/article/us-tesla-musk/elon-musk-buys...
  - lrn 8y ago
    Common stock bought on the open market.
- Keyframe 8y ago
  I know it's not the most pristine new organisation there is, but this was a rather interesting and unsettling read: https://www.zerohedge.com/news/2018-06-13/after-taunting-shorts-threats-unreal-carnage-musk-buys-another-25mm-tesla-stock https://www.zerohedge.com/news/2018-06-13/after-taunting-sho...
  - Consultant32452 8y ago
    If the article is correct, that he bought those shares specifically to burn the shorts, then good for him. It's no coincidence to me that in a time where TSLA has the largest short position on the planet that there seems to be daily front page negative press. Having the CEO flip the bird to nay-sayers and triple down is a good sign. That kind of tenacity is what I believe makes him successful, "Screw you, I'm gonna make a Trillion dollars here!" Disclosure: I have a small TSLA position, but I do consider it a high risk venture that has just as good a chance to buy me a house in 20 years as to go to 0.
matte_black 8y ago
If it goes much higher I’m planning to open a substantial short position, I don’t see TSLA getting into the 400s.
- maoistinquisitr 8y ago
  This whole current moment rhymes too well with 2000 and 2008. Who are the Ken Lays, the Bernie Ebbers's, and the Madoffs? I suspect Bezos and Musk are going to fall hard.
  - matte_black 8y ago
    You’re dead wrong about Bezos and Amazon. Expect to see AMZN in the 2000s in the next years.
    - Jyaif 8y ago
      If you are so sure about your prediction then you should invest a substantial amount of money in AMZN.
      - matte_black 8y ago
        I have.
  - Latteland 8y ago
    eventually everything goes down. amazon has gone so high, bezos has so much money, he'll be fin even if it goes down by half. he'd only have 60 billion. musk has much less but plenty too. space x and teslas are incredibly inventive and creative companies. they are also companies with only a limited monetary product stream. so they are vulnerable to having a few problems in a row. Even if they get problems fixed eventually it could hurt them. but my feeling is both companies will continue to generally succeed, even if they don't always make their schedules.
sabareesh 8y ago
poor shorts i got some of their money
csomar 8y ago
There is no precision if these short positions are offset by other positions (ie: options). The trader might be arbitraging spot/derivatives and so is not losing $2bn but rather making money. It is not even clear if the entity collecting this data can have such depth and knowledge of individual positions. Also my understanding is that unless you put capital, your position will margin called. It means the losses are not just on paper. The players have already engaged money.
noetic_techy 8y ago
Elon did warn everyone during that conference call where he supposedly went "nuts" that the biggest short burn of the century was coming. I listened and man was that overblown. He was simply bored of shitty questions.

86 points by antman 8y ago

That's a lot if they're talking about truly naked shorts. The only way I can see a number like this and think it's not a complete disaster is that these aren't really naked shorts. I can certainly see a situation where the natural longs that TSLA employees have via options and RSUs can get hedged secretly though a bank, and that shows up as a short in the market.

bjl 8y ago
A lot of the shorts are probably long the broader market (which vastly overperformed compared to TSLA over the last few years), which makes these kind of fluctuations much easier to stomach.
MediumD 8y ago
Most companies that I know of have a policy preventing employees from shorting/hedging their company's stock. I imagine virtually none of the shorts belong to current Tesla employees.
CydeWeys 8y ago
It's a pretty typical provision in employment contracts that you aren't allowed to bet against the stock of your employer. I'd be surprised if any meaningful percentage of Tesla employees were shorting their own company.
- kolbe 8y ago
  Hence my use of the word 'secretly'. Also, it would only take one particular rich/narcissistic employee to make up all of it if he wanted to secure a few billion dollars of his net worth for the future.

tejohnso 8y ago

I shorted (a very small amount) from about $320 down to about $270. That's when Elon had his very standoffish and defiant earnings call. After that I exited at a profit because I didn't think the downward reaction was severe enough. People were asking legitimate questions about orders and finances and he told them to shut up, while directly insulting their intelligence. That was an extremely bad sign to me. When I saw that even after that, there was still support in the $270s, I declared the market too bullish for my liking and was no longer comfortable being short. As far as I'm concerned TSLA has to turn a profit in the next couple of quarters or they're just not going to be able to be competitive enough with the additional financing they're going to require. Elon promises they won't need to raise capital. If he's right, great. But I'm not betting on it one way or the other.

ggm 8y ago
You're telling two stories. One is, that you have antipathies to the CEO because he behaves badly. Well, thats market-effecting, so its information you can (and did) use to inform your investment decisions. But, its a short-term investment process. This doesn't really inform deliverables in the medium to long term, or the fundamentals of the company. The second story is structural debt burden and the effect on profitability. I am not an economist, but I think you may have over-stated this. I think it would be a mistake to make investment decisions based on your information, absent clear signals from people who ARE economists about the effect on short, medium and longterm investment outcomes. If (as I suspect) you are looking for short term profits, well and good, you can use this rationally to say "dispationately I don't think I can see a return on my investment by value gain or dividend, so I won't invest" But if somebody is a non-dispassionate investor, in for the medium to long term because of a belief building the EV market has wider outcomes which WILL raise their stock value, or return dividends, then this debt burden is a risk-side decision: Is the risk of a problem sufficient to outweigh the chance of the upside in the longer term?
kjksf 8y ago
GM just had their annual meeting for shareholders. They said they'll increase production of Bolt but refused to say by how much and by when. In contrast, Tesla lays out their future plans months, sometimes years in advance. Tone aside, it seems to me that Tesla is being measured here by a completely different stick. Compared to all other public companies they provide vastly more "legitimate" information. Just for a few examples of "legitimate" questions that well known companies refuse to answer, even if politely: * GM won't tell you any details about future plans for Bolt and other EVs. Tesla: "we'll make 10k by end of 2018". GM: we'll increase production, don't ask us when or by how much" * Amazon only recently disclosed number of Prime subscribers, and only total number, not breaking down e.g. US from international * Netflix won't tell shareholders viewing numbers for any of their shows I could go on talking about information that companies don't share. It's just bizarre that people expect Tesla will just disclose anything that's asked.

zeusk 8y ago

That's not how shorting works. Most short positions are pairs trade to offset a long position elsewhere, and TSLA is a favorite punch bag for the wall street (crappy financials).

lrn 8y ago

Worth noting that Elon just purchased 72,000 TSLA shares worth $24,000,000 (purchased June 12 & 13).

SimbaOnSteroids 8y ago
Preferred or common shares because those are two different signals.
- kornish 8y ago
  Common, I believe.
- jeff18 8y ago
  Common: https://www.reuters.com/article/us-tesla-musk/elon-musk-buys-72500-of-tesla-shares-idUSKBN1J930L https://www.reuters.com/article/us-tesla-musk/elon-musk-buys...
- lrn 8y ago
  Common stock bought on the open market.
Keyframe 8y ago
I know it's not the most pristine new organisation there is, but this was a rather interesting and unsettling read: https://www.zerohedge.com/news/2018-06-13/after-taunting-shorts-threats-unreal-carnage-musk-buys-another-25mm-tesla-stock https://www.zerohedge.com/news/2018-06-13/after-taunting-sho...
- Consultant32452 8y ago
  If the article is correct, that he bought those shares specifically to burn the shorts, then good for him. It's no coincidence to me that in a time where TSLA has the largest short position on the planet that there seems to be daily front page negative press. Having the CEO flip the bird to nay-sayers and triple down is a good sign. That kind of tenacity is what I believe makes him successful, "Screw you, I'm gonna make a Trillion dollars here!" Disclosure: I have a small TSLA position, but I do consider it a high risk venture that has just as good a chance to buy me a house in 20 years as to go to 0.

matte_black 8y ago

If it goes much higher I’m planning to open a substantial short position, I don’t see TSLA getting into the 400s.

maoistinquisitr 8y ago
This whole current moment rhymes too well with 2000 and 2008. Who are the Ken Lays, the Bernie Ebbers's, and the Madoffs? I suspect Bezos and Musk are going to fall hard.
- matte_black 8y ago
  You’re dead wrong about Bezos and Amazon. Expect to see AMZN in the 2000s in the next years.
  - Jyaif 8y ago
    If you are so sure about your prediction then you should invest a substantial amount of money in AMZN.
    - matte_black 8y ago
      I have.
- Latteland 8y ago
  eventually everything goes down. amazon has gone so high, bezos has so much money, he'll be fin even if it goes down by half. he'd only have 60 billion. musk has much less but plenty too. space x and teslas are incredibly inventive and creative companies. they are also companies with only a limited monetary product stream. so they are vulnerable to having a few problems in a row. Even if they get problems fixed eventually it could hurt them. but my feeling is both companies will continue to generally succeed, even if they don't always make their schedules.

sabareesh 8y ago

poor shorts i got some of their money

csomar 8y ago

There is no precision if these short positions are offset by other positions (ie: options). The trader might be arbitraging spot/derivatives and so is not losing $2bn but rather making money. It is not even clear if the entity collecting this data can have such depth and knowledge of individual positions. Also my understanding is that unless you put capital, your position will margin called. It means the losses are not just on paper. The players have already engaged money.

noetic_techy 8y ago

Elon did warn everyone during that conference call where he supposedly went "nuts" that the biggest short burn of the century was coming. I listened and man was that overblown. He was simply bored of shitty questions.