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This comment I made a few weeks ago is coming alot closer to the truth than I would have expected. I hope for Space X and Tesla's sake that the reports of a di

This comment I made a few weeks ago is coming alot closer to the truth than I would have expected. I hope for Space X and Tesla's sake that the reports of a directory and Executive ban don't come true. https://news.ycombinator.com/item?id=18016250#18016292 https://news.ycombinator.com/item?id=18016250#18016292 SpaceX is doing well, Tesla has pulled itself back from the brink and may actually become a profitable car company. All Elon had to do was keep his head down and not pick twitter fights.... EDIT one thing I should point out is that some people have questioned if the tweet had any adverse affect at all on the shorts, given that the stock is down now. The answer is hell yes and the fact that the stock ash gone down since the tweet only strengthens the shorts case. The reason is that when you are short the biggest issue you have is that the stock could go against you, in this case that means it could go up. So to guard against that you generally have a price level in which you would exit the trade. So when Elon tweeted, a whole whack of shorts got stopped out, intentional or by their risk limits. Infact there is a lawsuit already filed by Citron due to this. That momentary bump, while short lived was more than enough to close out some short positions. If he's found to be in the wrong here by the SEC, then it seems like it wouldn't be too hard to find him guilty in the coming lawsuits.

empath75 8y ago
You say the shorts don't have any power to hurt tesla, but much of tesla's and elon musk's personal debt is backed by Tesla shares. If the price dips too low, it's potentially catastrophic for the company and him.
- eli 8y ago
  Is there any evidence the short sellers have ever caused the price to move at all?
  - AnthonyMouse 8y ago
    Shorting a stock means borrowing shares and selling them (making the seller short of shares they still owe). This puts the shares back on the market and absorbs purchasing demand. By supply and demand the price goes down. Regardless of any change in public sentiment or incentives to publicize dirt, at scale shorting a stock inherently reduces the price while the short positions are open.
    - eli 8y ago
      In practice, at the scale of short selling actually taking place, does it materially impact the price of Tesla shares? Is there even any way to know? Seems like a boogeyman to blame all manner of company ills on. For example, I think very few of the negative press Tesla has received over e.g. union busting or manufacturing defects is due to a short seller conspiracy. That's newsworthy stuff and the media is doing its job.
      - GW150914 8y ago
        Permitting and perpetuating this kind of myth-making is practically part of Elon's fiduciary duty to his shareholders at this point. You can't fault him for doing it, because he has to. You have to admit though, based on comments all over any story about Tesla here at least, that it works as a bogeyman. The only other fiction that’s more powerful is that Musk does everything he does to send humanity to Mars, save the world, etc. Musk has a true talent for figuring out what his target audience wants to believe, and then selling it to them at a premium. Smart, technically minded people (key early adopters of Tesla) are desperate for a way to keep humanity going in the face of climate change, possible impact events, and so on. Musk more or less frames his rather mundane personal aggrandizement and money-making endeavors as lynchpins in just those areas. He helps to convince people who want to believe, that they can help save the world not through anything like sacrifice, but by buying stock or a luxury car! They eat it up, and are enraged at people who scoff, and no one scoffs harder than someone who puts their money on a bet that the stock is overvalued. As a result the short is already a subject of hate, and perfect to pin all of the evils of the world on. It perpetuates a classic tribal narrative and dresses it up in just enough pseudo intellectual finery to convince a target audience which already wants to believe. As a bonus that audience thinks it’s too smart to be fooled that way, and above tribalism, making it easier to sell the story and harder for them to admit what they’ve fallen for. Look at some of these comments, and you see the evidence of just what I’m talking about! The law says a lot of things. I'm ok with short sellers losing their shirts regardless. — I also take the long view; Elon is instrumental to the long-term outcome for Tesla, our species, and our planet. — Because he made short sellers look like idiots? I think not. I just bought more. — SEC suing Elon Musk is , quite frankly one of the most abhorrent actions a US govt agency can ever do against genuine American Entrepreneurship and American innovative spirit. There is not a single human being on the planet who comes close to Elon Musk when it comes to big , bold innovation and tech entrepreneurship who is putting his heart and soul into leading the human race into the future. — you can’t disrupt or otherwise show up all of these players: the us/eu/russian/chinese space industries (and by extension the governments of china and russia), the oil industries of russia/saudi/usa, the major auto manufacturers, power companies, professional car and truck drivers, and the us dealership association (what am i forgetting), all of whom are politically very well connected, and some of whom have their hordes of paid shill internet commenters, and upvoting/downvoting bot nets (not that that would ever happen on hn (and if it would it’s against hn rules to suggest it)) and expect not to get trounced. elon might have fucked up by sending that tweet, but the response here, on reddit, and by the gov’t is way out of proportion, esp considering everything positive that this man has accomplished and is currently working on. — He didn’t screw anyone over. Wall street gamblers lost money, and our culture coddles Wall Street bros like helpless babies. Traders who lost money wouldn’t have had the stock to trade without Elon in the first place! — The entire world will lose if Elon is forced out. He’s the biggest fighter for climate change and space travel in modern history, greater than Al Gore in marketing and execution, greater than Buzz Aldrin, Tyson, and cosmos. I’d much rather have an honest relatable Elon Musk than a suit. I’d rather have creativity than suffocating structure. — The subtext is that Elon intentionally bumped the stock price to screw over short sellers like Jim Chanos. But the rationale behind 10b5 is to protect investors from fraud. Right, we are not concerned with protecting short-sellers who spend all day on twitter making up negative stories about their targets. — The battery and solar operations side of TSLA are critical to spaceX's mission to Mars. Can't have a martian colony without being able to harvest and store energy. Additionally the CV being done at Tesla could prove critical in automating prefabrication of living spaces and life support infrastructure. Can't be doing anything like that remote controlled with 8 min latency. — What a joke, there are plenty of scumbag and criminal leaders of corporations and this is the guy who doesn't walk. It'll be a sad day for the world if this guy goes to jail. — I know where Elon comes from, what missions and goals he has stated for years now, and what he is trying to accomplish. I promise you, Elon legitimately thought there would be an opportunity to go private again. He's said he wanted to do so in the past, and even has said they never wanted to go public, but were left with no choice. I don't think any part of Elon was trying to commit fraud or security manipulation. He made a mistake, we all do. He said something that should not have been said at that given point of time. I'm sure he was excited. He even said he typed that tweet in the car after leaving SpaceX.
  - goshx 8y ago
    No, I don't think all that negativism in the news about a company that is disrupting the automotive industry in less than 15 years, have a product that customers literally make lines to buy and they love it when they finally receive them are brought up by short sellers. I mean, who would not want a company like that to succeed? /sacarsm
- quirkot 8y ago
  In what way would that be catastrophic for the company?
  - deelowe 8y ago
    If the stock falls below a certain price, they have to pay down debt. This is a requirement when you use stock as collateral.
  - dx87 8y ago
    From what I understand, and I'm sure I'm using the wrong terminology, they got loans to run the company using Tesla stock, and if the value dips below a certain amount, the loan terms say they need to be repaid with cash instead of stock.
- matwood 8y ago
  What exactly did the shorts do here? Musk has brought on all this scrutiny himself. The shorts didn't bail out Solar City, miss nearly every production target, use TSLA as a way to personally finance a lavish lifestyle, or commit securities fraud. The shorts are all over this stock because of issues like the above. They were not the cause of those issues.
  - DSingularity 8y ago
    Winner winner chicken dinner. Lol. Musk over extended. Plain and simple. He played it risky and now, when it didn’t work out, he is pissed. In response he waged war via twitter on those who took risks in the other direction. Would have been wiser for him to focus on finding a way to cut his losses so he can continue fighting. Instead he played with fire and was burned.
  - JoshCole 8y ago
    The idea that Tesla is drastically missing its production targets is overstated. It originally claimed that what was later named the Model 3 would begin production in 2017. This claim was made as far back as 2014. This occurred as projected. It has since been ramping up steadily. The rate of that ramp up has been slower than initially projected, but is well within the long-term projected numbers. Critically, Tesla ramp up is already high enough that it is now leading the US in sales of electric vehicles. The numbers are decidedly in favor of Tesla, who sells almost as many vehicles a month as the other electric providers sell in a year. This should be a good thing in your eyes, considering the impact of climate change which will be felt by this generation. However, the legacy of effect of sowing doubt about climate change and automobiles is bearing itself out. The seeds were sown and they now sprout. Enough idiots were convinced to bet against renewable energy and now they're going to do their best to damn the rest us. This seems to me like a woe to the world moment. The world is trying to take down someone seeking its good. It reminds me of the persecution of Jesus Christ. Read through this thread and see the false witnesses being refuted by his co-laborers and friends. Read the testimony of the people saying that his product is good. Read the empirical reports on the quality of his work. When the righteous are persecuted, it is done, not because they are evil, but because they are good. Nobody is afraid of the incompetent fool, but rival automaker executives line up to plead that Elon Musk should be removed from his position, now that they realize the danger they are in.
- compcoffee 8y ago
  >If the price dips too low, it's potentially catastrophic for the company and him. Shorting a stock doesn't magically make its price drop.
  - greenshackle2 8y ago
    More buys = higher price. More sells = lower price. Shorting is selling* . This is neither magic nor controversial. * And buying back later of course. But in the meantime, does a short-sell look any different than a sell on the order book?
    - compcoffee 8y ago
      Every transaction has a buyer and a seller. Shorting is selling? Selling to whom? Ah, right, a buyer. Telsa share price has risen through extreme short interest for years. How?
      - AnthonyMouse 8y ago
        > Shorting is selling? Selling to whom? Ah, right, a buyer. A buyer who would otherwise have had to buy from a seller who wanted a higher price. The stock price is really the value for which shares were most recently exchanged. If the price is $500, shares were exchanged for $500. That isn't the same as what other people value the shares at, which is different for each person. The people who own shares value them at more than their market price (or they would sell) and the people who can afford but don't own shares value them less (or they would buy). Someone could own shares and value them at $600, so they wouldn't even sell at $550, meanwhile another owner values them at no more than $500.02, so they sell as soon as the price hits $500.02. That's where the bid/ask spread comes from. The lowest seller values the shares at $500.02, the highest buyer values them at $499.98, so the seller keeps their shares and the buyer keeps their money, and the share price is still considered to be $500.00 because that's what the last actual sale went through as. To get another transaction either the seller or the buyer has to "cross the spread" and meet the other side's price and then the price goes up or down based on whether it was the buyer or the seller. So what happens when someone makes a short sale? They borrow shares and cross the spread to sell for $499.98. Now the share price has gone down two cents. Moreover, the buyer willing to pay $499.98 now has their shares. The next highest bid is $499.97. If another short seller supplies that buyer with shares, the share price drops again and so does the bid price, because the previous high bid already has their shares. The more short sellers, the lower the sale price. This is one of the reasons why short selling is frequently unprofitable. If you're not an early short seller, you're selling shares for $450 that all else equal would be worth $500 once the existing shorts close their positions, and at some point you have to buy them back. Which means to make money the company doesn't just have to lose value, it has to fail hard enough to prevent your profits from being erased by other shorts buying back shares to close their positions. > Telsa share price has risen through extreme short interest for years. How? If the share price would rise by $3 while short selling would cause it to decline by $1 then on net the price rises by $2, i.e. $1 less than it would have but still a positive value.
- jeffreyrogers 8y ago
  Shorts don't affect the stock the price that way. They profit if the price goes down, sure. And lots of short interest might make people more likely to sell, which will drive the price down, but just shorting a stock doesn't have much effect on the price.
  - sobani 8y ago
    Shorting is selling a stock. Selling a stock lowers its price. The way shorting works is Alice lends a stock from Bob and gives him a small compensation for that. Then Alice sells that stock she lend. Somewhere in the future Alice will buy the stock and give it back to Bob. If the price goes up enouogh, Alice will (be forced to) cut her losses. For this she has to buy a stock, which will increase the price further. This can lead to a so called 'short squeeze' when shorters Carol and Dave also (are forced to) cut their losses, driving the price up even further. Right now >28% the TSLA float is sold short[0]. That must have an impact on the price. Also should a TSLA short squeeze ever happen, that's going to be epic. There will be enough Tesla believers that it's probable going to be hard to find that 28% for anything close to reasonable prices. [0] https://www.gurufocus.com/term/ShortPercentageOfFloat/NAS:TSLA/Short-Percentage-of-Float/Tesla%20Inc https://www.gurufocus.com/term/ShortPercentageOfFloat/NAS:TS...
jonathankoren 8y ago
>All Elon had to do was keep his head down and not pick twitter fights.... Do you mean, act like the CEO of a public ally traded company and not publicly make unsubstantiated material statements?
- dudus 8y ago
  Yeah. As opposed of acting like the leader of the country
  - stevew20 8y ago
    Zing!
  - api 8y ago
    Twitter: where the rich and powerful publicly make complete fools of themselves.
    - CoryShmallager 8y ago
      I've seen people starting to say the differences between Trump and Musk are smaller than one initially might think. (personality-wise anyway) And it's hard to ignore once you notice it.
notyourday 8y ago
> All Elon had to do was keep his head down and not pick twitter fights.... I'm pretty sure that's about as likely as Trump not tweeting his thoughts
djsumdog 8y ago
I'd hope the company itself would be fine. I really hate this idea of the grand visionary. A good friend of mine who is a mechanical engineer despises Musk. I listened to a bit of his Joe Regan interview and when Regan asked him how he has the time to do all of the things he does, there are smoke jokes about him being an alien, but not once did he say, "Well I have an amazing team of engineers" and credit all the thousands of people in his organizations that actually do the work. He made it sound like he just constantly engineers things, but I find it hard to believe that at any point he's sitting down with CAD and fluid dynamic applications and mapping out experiments for rocket prototypes. I don't doubt he's capable of doing that with his background (or learning how to do it) but it's much more likely there is a whole team of really dedicated experts that he just leaves uncredited. Are Apple products different now that Jobs are gone? One could argue that, but the core people that make and design all their overpriced, planned obsolescence devices are still there, often uncredited, while everyone else likes to focus on the captain of a ship.
- greedo 8y ago
  Musk told Stanton that he had "one of the world's best engineering teams who normally design spaceships and spacesuits working on this thing 24 hours a day."[1] [1]https://www.businessinsider.com/elon-musk-reveals-email-thread-explaining-why-he-built-mini-submarine-2018-7 https://www.businessinsider.com/elon-musk-reveals-email-thre... That took all of 1 minute on Google...
- emodendroket 8y ago
  I said it before, but: ever read War and Peace? I think you could easily adapt Tolstoy's thesis to business: executives are mostly there to ratify the decisions their subordinates made on the spot. Tolstoy stakes out the most extreme position, but I think we could at least say executive control is more attenuated than executives would like to believe.
- stcredzero 8y ago
  Are Apple products different now that Jobs are gone? Yes. Jobs as local despot acted as a curb to bad decisions. Jobs had a vision which acted as a countervailing force to keep Apple from being completely sucked into being a money grubbing luxury goods company. the core people that make and design all their overpriced, planned obsolescence devices are still there, often uncredited, while everyone else likes to focus on the captain of a ship. We know from the historical record that Jobs had quite good judgement, even in technical fields, and we know that he countermanded and convinced executives and managers to steer them in the right direction. I suspect that the Apple of today is descending into being just a money-grubbing luxury goods company.
anthonybsd 8y ago
>Tesla has pulled itself back from the brink and may actually become a profitable car company This is a very very generous assessment of the dire financial situation TSLA is in. At best they have hit their production at the expense of quality which will only temporarily offset their costs. Any sustainable mid-term profitability is a very big question mark at this point.
- badloginagain 8y ago
  I thought the narrative was they just need to get through the short term before production stabilizes and is able to meet demand. I do feel there is a difference between Tesla the car, and Tesla the company. Tesla the car is still the most desirable electric on the market. Tesla the company is a different story altogether.
  - JoshCole 8y ago
    The narrative shifts constantly because the narrative is anti-Tesla. So it has to shift, whenever they make it past another hurdle. It started with them being ridiculous for even trying to make an electric car. Then it became that they couldn't mass produce. Now they are being mass produced. It sometimes shifts towards their safety, but it isn't a preferred avenue of attack because the stats show that the cars are safer than other vehicles, which produces cognitive dissonance in people who are mislead as to the true nature of the news they are hearing about Tesla.
    - michaelt 8y ago
      The narrative shifts constantly because the narrative is anti-Tesla. So it has to shift, whenever they make it past another hurdle. Or from another perspective, the narrative shifts constantly because the delivery date for my $35,000 car keeps shifting :)
      - badloginagain 8y ago
        Pay another $1000 for priority queueing!
dirkgently 8y ago
> I hope for Space X and Tesla's sake that the reports of a directory and Executive ban don't come true. Why? Because Elon is a special snowflake and deserves a different treatment than other white-collar criminals?
- deleted 8y ago
  [deleted]
- hef19898 8y ago
  Absolutely not, when and if he is found guilty of market manipulation then be it, he deserves everything that coming his way. If not then, well not. It would just be pitty that hubris has destroyed a great legacy in that case. And, even more troubling, with Tesla basically being Musk its future, and that of its employees, looks rather grim all things considered. Best thing for Tesla would be if Musk was not found guilty and stepped down none the less. I don't see that happening so. SpaceX should be fine I think, even without him.
- 55555 8y ago
  How about because nobody should be able to go from perfectly fine to having ruined their life* in under 30 seconds. you have one dumb thought, open twitter on your phone, push tweet, and it's over. That's not an ability people should have. We are impulsive and often dumb.
  - gurumeditations 8y ago
    He’s a big boy.
  - Slartie 8y ago
    He was perfectly fine to surrender his CEO position at Tesla (and any position of power in any other company he is in) in order to get rid of this "ability". He did not. Certain positions of power just come with the ability to ruin your life in seconds. Some even can ruin the life of others in milliseconds. You cannot cushion these people from these facts. If they cannot deal with that, they should surrender the power. The concept is called responsibility.
caleblloyd 8y ago
In addition to causing a short squeeze, his tweet also swung the options prices unfavorably for the time-bound put holders.
tptacek 8y ago
Amazingly, Musk apparently had reached a settlement with the SEC over this, then blew it up: https://twitter.com/tomgara/status/1045472592595996672 https://twitter.com/tomgara/status/1045472592595996672 I don't understand people who defend him as head of a public company.
- wallace_f 8y ago
  Perhaps some of what makes him capable of making these mistakes is also part of why he has multiple revolutionary companies.
  - sokoloff 8y ago
    Being unconstrained by reality? You might actually be onto something there; I know a few people who are similarly unconstrained and they end up bringing just the right mix of crazy and sweat together to make something novel. It also has a serious downside in this particular case, however.
    - SmellyGeekBoy 8y ago
      Not wanting to make this political, but one could say the same about the current US president. Based on his social media output it seemed he was downright batshit insane when he got elected (some might say even still, although he seems to have calmed down a bit). He seems to be achieving things though and we didn't end up with WW3 as a lot of people predicted. Perhaps the world needs these crazy people occasionally to come in and stir up the pot? (Don't get me wrong, I'm not a fan of the guy and not being from the US my opinion doesn't really matter, but thought I'd give me $0.02 so to speak)
      - velcrovan 8y ago
        "Achieving things"? What things?
- dlor 8y ago
  I guess there's a difference between "head of a large public company" and "founder of a large public company". His track record at the latter speaks for itself. But the fact that someone who founded a company isn't necessarily the best person to run it long term is uncomfortable. Especially on a website like this one, with so many aspiring founders.
pvelagal 8y ago
SEC suing Elon Musk is , quite frankly one of the most abhorrent actions a US govt agency can ever do against genuine American Entrepreneurship and American innovative spirit. There is not a single human being on the planet who comes close to Elon Musk when it comes to big , bold innovation and tech entrepreneurship who is putting his heart and soul into leading the human race into the future.
- ajmurmann 8y ago
  I love the work that Musk has done. Everyone has to play by the same rules though. We cannot bend the law because someone has otherwise done amazing work.
  - pvelagal 8y ago
    So how many financial execs got punished for creating the 2008 financial crisis, the worst in our lifetimes (hopefully) , which brought the world to the brink ? https://thehill.com/blogs/pundits-blog/finance/309544-why-have-no-ceos-been-punished-for-the-financial-crisis https://thehill.com/blogs/pundits-blog/finance/309544-why-ha...
    - deleted 8y ago
      [deleted]
    - ajmurmann 8y ago
      What they did might have been morally appalling, but much harder to pin as breaking a law. What Elon did was a blatant and highly public violation of regulations
      - manicdee 8y ago
        Obviously Elon’s mistake was not changing the laws to make his crime legal. Cf Goldman Sachs the great vampire squid.
    - EpicEng 8y ago
      Not an apples to apples comparison there, but even if it were; is your argument now that we should let Elon get away with breaking the law because others have gotten away with it in the past and you happen to respect Elon more than those people?
IAmGraydon 8y ago
Exactly. It’s called a stop loss. A spike in the wrong direction can be very costly to shorts.
apatters 8y ago
> All Elon had to do was keep his head down and not pick twitter fights.... You know what, this could be said about a lot of people, including the freaking President. I'm beginning to wonder if the real problem is Twitter. Specifically the most fundamental aspect of its design -- the ability to blast off brief messages to thousands of people any time, anywhere. Maybe we're learning that that this design leads people, even smart, well-meaning people, to publish crap. No one is crafting well thought out, quality content in 280 characters on their phone. The vast majority of Tweets and RTs are going to be total junk, lizard brain stuff. Sure enough Twitter has become the abuse hub of the Internet. Sure, people love to use it. They love to use cocaine too once they get a taste. And drinking socially is fine, but booze too hard and the nicest person can turn into a monster. Maybe we just shouldn't have what Twitter provides.
- citrablue 8y ago
  Really? You want to blame cocaine and hard booze? 1 to many communications is useful. Many to many communications (email) is useful. Push comms are useful. People are responsible for what they do, and what they say. Be it drugs or (I can't believe I'm saying this), Twitter. The most interesting thing is that many would blame Trump more for his Twitter mis-use than people who mis-use substances. And, conversely, many blame drug abusers but excuse Trump. In the end, we are either responsible for our actions or we are not. I believe the former is a crucial piece for functioning society; it needs to be tempered with a non-judgemental attitude and treated as a public health issue if it spreads too far.
- JoshCole 8y ago
  I completely agree with you that Twitter is playing a casual role in the degradation of discourse within our society. Go to the popular Twitter feeds and there are very obvious bot posts trying to scam and manipulate people. Twitter has not managed to stop them. Elon Musk's twitter feed is a great example of this. It even has the bots pretending to be him. Here, if you want to appear popular and have greater ability to manipulate people, you can buy some followers: https://devumi.com/twitter-followers/ https://devumi.com/twitter-followers/ Now regardless of your worthiness you have social proof! Advocate for the lack of existence of a round earth to your hearts content, now with greater effectiveness. The spread property of news on Twitter favors falsehood over truth: https://www.businessinsider.com/mit-study-fake-news-spreads-6-times-faster-on-twitter-than-truth-2018-3 https://www.businessinsider.com/mit-study-fake-news-spreads-... This fact when combined with medium as message https://www.litcharts.com/lit/amusing-ourselves-to-death/chapter-1-the-medium-is-the-metaphor https://www.litcharts.com/lit/amusing-ourselves-to-death/cha... leads to a system which actively promotes the wrong sort of content. Clickbait is a reality, because clickbait gets clicks, so people write clickbait titles. The existence of the rules like those Hacker News has are a fight against these forces. This community was built in part with an understanding that these forces are real and harmful to discourse. Twitter meanwhile has better engagement metrics by not solving these problems. So don't expect them to change, without any effort on their part. Fighting your own incentives is very hard. Twitter is basically addicted to harming discourse. Obviously, no ill will on its part, since this stuff wasn't obvious early on. It has benefits too though. Like getting to hear the perspective of the people in question, without intermediary.
erikb 8y ago
> So when Elon tweeted, a whole whack of shorts got stopped out What means stopped out? The bank forcing the lender to give the stock back right at this point?
- sokoloff 8y ago
  Many investors (long or short) place what are called stop orders to protect their positions from steep losses. For a long investor, you might buy a stock at $100, watch it go up to $150 and enter a sell-stop order at $130. That stop order has no effect so long as the price stays above $130. When/if the stock drops to $130, the order becomes a market order to sell out, protecting from further losses. For a short seller, they might place a buy-stop order (at a price higher than the current price) to protect from disastrous runaway price to the high side. Those stops could have been triggered by the run-up after Musk's tweet.
- siberianbear 8y ago
  "Shorting" a stock means selling it without owning it, essentially owning negative stock. You're betting that it will go down, and then when it does go down, you close your position by buying the stock (to get back to zero shares). The risk in doing this is unlimited. If you short a stock at $100, and then it goes to $500, you've lost $400. Your broker doesn't want to take liability for your loss if you're not able to cover it. So your broker will forcibly close your position for you. Even if your broker doesn't close your position, you might do it yourself to stop losing money. When a lot of people do this all at once, it's called a "short squeeze" as everyone who was short buys shares to close their short positions. It can make the price go up. I don't follow Tesla's stock price, but Musk getting on Twitter saying something that could make the stock price go up could (and perhaps did) cause a short squeeze.
  - erikb 8y ago
    My understanding is different: Shorting a stock means borrowing it and paying a fee for borrowing it. Then selling the borrowed stock and hoping when you buy it back it's worth less. If the borrower doesn't want his stock back and the price is too high for you, then you simply don't buy and continue to pay the fee. So if you borrow stock for $100, maybe each year you pay a $5 fee, and sell it for $100. Considering there wouldn't be any transaction fees you would now have $95. If the price now rises to $500, you don't buy but continue to pay the $5. So it means you are only $90 ahead instead of $95. But you are not in the minus. This is actually a really good deal for both the borrower and the short seller, which is why I bet there are lots of rules forbidding that and banks not actually doing it if you don't borrow a certain minimum size of a few million $. I don't know that, though. In theory you and I could do that game as well, if it's not illegal.
tinco 8y ago
Why do you say for SpaceX's sake? Would it not be great news for SpaceX that their CEO would be forced out of the other companies he's running, and thus almost has to focus most of his time on SpaceX?
- Lewton 8y ago
  When the sec bans you from running a company, you’re banned from running -any- company
  - Faark 8y ago
    > The SEC [..] will ask a judge to bar Musk from serving as an officer or director of a public company Article says public company. SpaceX is private.
tinkerteller 8y ago
Personally I don't Musk had a choice. If he didn't do what he did then very likely Tesla would be bankrupt by now because of its debt obligations + short sellers. The short sellers counted on it. The choices he faced were go bankrupt and lose company or do this risky move and hope SEC lets you go with slap on the wrist.
dnautics 8y ago
I think it's quite interesting that the SEC is obviously in the right, but it brings to question whether or not broadly, the SEC serves the public good.

empath75 8y ago

You say the shorts don't have any power to hurt tesla, but much of tesla's and elon musk's personal debt is backed by Tesla shares. If the price dips too low, it's potentially catastrophic for the company and him.

eli 8y ago
Is there any evidence the short sellers have ever caused the price to move at all?
- AnthonyMouse 8y ago
  Shorting a stock means borrowing shares and selling them (making the seller short of shares they still owe). This puts the shares back on the market and absorbs purchasing demand. By supply and demand the price goes down. Regardless of any change in public sentiment or incentives to publicize dirt, at scale shorting a stock inherently reduces the price while the short positions are open.
  - eli 8y ago
    In practice, at the scale of short selling actually taking place, does it materially impact the price of Tesla shares? Is there even any way to know? Seems like a boogeyman to blame all manner of company ills on. For example, I think very few of the negative press Tesla has received over e.g. union busting or manufacturing defects is due to a short seller conspiracy. That's newsworthy stuff and the media is doing its job.
    - GW150914 8y ago
      Permitting and perpetuating this kind of myth-making is practically part of Elon's fiduciary duty to his shareholders at this point. You can't fault him for doing it, because he has to. You have to admit though, based on comments all over any story about Tesla here at least, that it works as a bogeyman. The only other fiction that’s more powerful is that Musk does everything he does to send humanity to Mars, save the world, etc. Musk has a true talent for figuring out what his target audience wants to believe, and then selling it to them at a premium. Smart, technically minded people (key early adopters of Tesla) are desperate for a way to keep humanity going in the face of climate change, possible impact events, and so on. Musk more or less frames his rather mundane personal aggrandizement and money-making endeavors as lynchpins in just those areas. He helps to convince people who want to believe, that they can help save the world not through anything like sacrifice, but by buying stock or a luxury car! They eat it up, and are enraged at people who scoff, and no one scoffs harder than someone who puts their money on a bet that the stock is overvalued. As a result the short is already a subject of hate, and perfect to pin all of the evils of the world on. It perpetuates a classic tribal narrative and dresses it up in just enough pseudo intellectual finery to convince a target audience which already wants to believe. As a bonus that audience thinks it’s too smart to be fooled that way, and above tribalism, making it easier to sell the story and harder for them to admit what they’ve fallen for. Look at some of these comments, and you see the evidence of just what I’m talking about! The law says a lot of things. I'm ok with short sellers losing their shirts regardless. — I also take the long view; Elon is instrumental to the long-term outcome for Tesla, our species, and our planet. — Because he made short sellers look like idiots? I think not. I just bought more. — SEC suing Elon Musk is , quite frankly one of the most abhorrent actions a US govt agency can ever do against genuine American Entrepreneurship and American innovative spirit. There is not a single human being on the planet who comes close to Elon Musk when it comes to big , bold innovation and tech entrepreneurship who is putting his heart and soul into leading the human race into the future. — you can’t disrupt or otherwise show up all of these players: the us/eu/russian/chinese space industries (and by extension the governments of china and russia), the oil industries of russia/saudi/usa, the major auto manufacturers, power companies, professional car and truck drivers, and the us dealership association (what am i forgetting), all of whom are politically very well connected, and some of whom have their hordes of paid shill internet commenters, and upvoting/downvoting bot nets (not that that would ever happen on hn (and if it would it’s against hn rules to suggest it)) and expect not to get trounced. elon might have fucked up by sending that tweet, but the response here, on reddit, and by the gov’t is way out of proportion, esp considering everything positive that this man has accomplished and is currently working on. — He didn’t screw anyone over. Wall street gamblers lost money, and our culture coddles Wall Street bros like helpless babies. Traders who lost money wouldn’t have had the stock to trade without Elon in the first place! — The entire world will lose if Elon is forced out. He’s the biggest fighter for climate change and space travel in modern history, greater than Al Gore in marketing and execution, greater than Buzz Aldrin, Tyson, and cosmos. I’d much rather have an honest relatable Elon Musk than a suit. I’d rather have creativity than suffocating structure. — The subtext is that Elon intentionally bumped the stock price to screw over short sellers like Jim Chanos. But the rationale behind 10b5 is to protect investors from fraud. Right, we are not concerned with protecting short-sellers who spend all day on twitter making up negative stories about their targets. — The battery and solar operations side of TSLA are critical to spaceX's mission to Mars. Can't have a martian colony without being able to harvest and store energy. Additionally the CV being done at Tesla could prove critical in automating prefabrication of living spaces and life support infrastructure. Can't be doing anything like that remote controlled with 8 min latency. — What a joke, there are plenty of scumbag and criminal leaders of corporations and this is the guy who doesn't walk. It'll be a sad day for the world if this guy goes to jail. — I know where Elon comes from, what missions and goals he has stated for years now, and what he is trying to accomplish. I promise you, Elon legitimately thought there would be an opportunity to go private again. He's said he wanted to do so in the past, and even has said they never wanted to go public, but were left with no choice. I don't think any part of Elon was trying to commit fraud or security manipulation. He made a mistake, we all do. He said something that should not have been said at that given point of time. I'm sure he was excited. He even said he typed that tweet in the car after leaving SpaceX.
- goshx 8y ago
  No, I don't think all that negativism in the news about a company that is disrupting the automotive industry in less than 15 years, have a product that customers literally make lines to buy and they love it when they finally receive them are brought up by short sellers. I mean, who would not want a company like that to succeed? /sacarsm
quirkot 8y ago
In what way would that be catastrophic for the company?
- deelowe 8y ago
  If the stock falls below a certain price, they have to pay down debt. This is a requirement when you use stock as collateral.
- dx87 8y ago
  From what I understand, and I'm sure I'm using the wrong terminology, they got loans to run the company using Tesla stock, and if the value dips below a certain amount, the loan terms say they need to be repaid with cash instead of stock.
matwood 8y ago
What exactly did the shorts do here? Musk has brought on all this scrutiny himself. The shorts didn't bail out Solar City, miss nearly every production target, use TSLA as a way to personally finance a lavish lifestyle, or commit securities fraud. The shorts are all over this stock because of issues like the above. They were not the cause of those issues.
- DSingularity 8y ago
  Winner winner chicken dinner. Lol. Musk over extended. Plain and simple. He played it risky and now, when it didn’t work out, he is pissed. In response he waged war via twitter on those who took risks in the other direction. Would have been wiser for him to focus on finding a way to cut his losses so he can continue fighting. Instead he played with fire and was burned.
- JoshCole 8y ago
  The idea that Tesla is drastically missing its production targets is overstated. It originally claimed that what was later named the Model 3 would begin production in 2017. This claim was made as far back as 2014. This occurred as projected. It has since been ramping up steadily. The rate of that ramp up has been slower than initially projected, but is well within the long-term projected numbers. Critically, Tesla ramp up is already high enough that it is now leading the US in sales of electric vehicles. The numbers are decidedly in favor of Tesla, who sells almost as many vehicles a month as the other electric providers sell in a year. This should be a good thing in your eyes, considering the impact of climate change which will be felt by this generation. However, the legacy of effect of sowing doubt about climate change and automobiles is bearing itself out. The seeds were sown and they now sprout. Enough idiots were convinced to bet against renewable energy and now they're going to do their best to damn the rest us. This seems to me like a woe to the world moment. The world is trying to take down someone seeking its good. It reminds me of the persecution of Jesus Christ. Read through this thread and see the false witnesses being refuted by his co-laborers and friends. Read the testimony of the people saying that his product is good. Read the empirical reports on the quality of his work. When the righteous are persecuted, it is done, not because they are evil, but because they are good. Nobody is afraid of the incompetent fool, but rival automaker executives line up to plead that Elon Musk should be removed from his position, now that they realize the danger they are in.
compcoffee 8y ago
>If the price dips too low, it's potentially catastrophic for the company and him. Shorting a stock doesn't magically make its price drop.
- greenshackle2 8y ago
  More buys = higher price. More sells = lower price. Shorting is selling* . This is neither magic nor controversial. * And buying back later of course. But in the meantime, does a short-sell look any different than a sell on the order book?
  - compcoffee 8y ago
    Every transaction has a buyer and a seller. Shorting is selling? Selling to whom? Ah, right, a buyer. Telsa share price has risen through extreme short interest for years. How?
    - AnthonyMouse 8y ago
      > Shorting is selling? Selling to whom? Ah, right, a buyer. A buyer who would otherwise have had to buy from a seller who wanted a higher price. The stock price is really the value for which shares were most recently exchanged. If the price is $500, shares were exchanged for $500. That isn't the same as what other people value the shares at, which is different for each person. The people who own shares value them at more than their market price (or they would sell) and the people who can afford but don't own shares value them less (or they would buy). Someone could own shares and value them at $600, so they wouldn't even sell at $550, meanwhile another owner values them at no more than $500.02, so they sell as soon as the price hits $500.02. That's where the bid/ask spread comes from. The lowest seller values the shares at $500.02, the highest buyer values them at $499.98, so the seller keeps their shares and the buyer keeps their money, and the share price is still considered to be $500.00 because that's what the last actual sale went through as. To get another transaction either the seller or the buyer has to "cross the spread" and meet the other side's price and then the price goes up or down based on whether it was the buyer or the seller. So what happens when someone makes a short sale? They borrow shares and cross the spread to sell for $499.98. Now the share price has gone down two cents. Moreover, the buyer willing to pay $499.98 now has their shares. The next highest bid is $499.97. If another short seller supplies that buyer with shares, the share price drops again and so does the bid price, because the previous high bid already has their shares. The more short sellers, the lower the sale price. This is one of the reasons why short selling is frequently unprofitable. If you're not an early short seller, you're selling shares for $450 that all else equal would be worth $500 once the existing shorts close their positions, and at some point you have to buy them back. Which means to make money the company doesn't just have to lose value, it has to fail hard enough to prevent your profits from being erased by other shorts buying back shares to close their positions. > Telsa share price has risen through extreme short interest for years. How? If the share price would rise by $3 while short selling would cause it to decline by $1 then on net the price rises by $2, i.e. $1 less than it would have but still a positive value.
jeffreyrogers 8y ago
Shorts don't affect the stock the price that way. They profit if the price goes down, sure. And lots of short interest might make people more likely to sell, which will drive the price down, but just shorting a stock doesn't have much effect on the price.
- sobani 8y ago
  Shorting is selling a stock. Selling a stock lowers its price. The way shorting works is Alice lends a stock from Bob and gives him a small compensation for that. Then Alice sells that stock she lend. Somewhere in the future Alice will buy the stock and give it back to Bob. If the price goes up enouogh, Alice will (be forced to) cut her losses. For this she has to buy a stock, which will increase the price further. This can lead to a so called 'short squeeze' when shorters Carol and Dave also (are forced to) cut their losses, driving the price up even further. Right now >28% the TSLA float is sold short[0]. That must have an impact on the price. Also should a TSLA short squeeze ever happen, that's going to be epic. There will be enough Tesla believers that it's probable going to be hard to find that 28% for anything close to reasonable prices. [0] https://www.gurufocus.com/term/ShortPercentageOfFloat/NAS:TSLA/Short-Percentage-of-Float/Tesla%20Inc https://www.gurufocus.com/term/ShortPercentageOfFloat/NAS:TS...

jonathankoren 8y ago

>All Elon had to do was keep his head down and not pick twitter fights.... Do you mean, act like the CEO of a public ally traded company and not publicly make unsubstantiated material statements?

dudus 8y ago
Yeah. As opposed of acting like the leader of the country
- stevew20 8y ago
  Zing!
- api 8y ago
  Twitter: where the rich and powerful publicly make complete fools of themselves.
  - CoryShmallager 8y ago
    I've seen people starting to say the differences between Trump and Musk are smaller than one initially might think. (personality-wise anyway) And it's hard to ignore once you notice it.

notyourday 8y ago

> All Elon had to do was keep his head down and not pick twitter fights.... I'm pretty sure that's about as likely as Trump not tweeting his thoughts

djsumdog 8y ago

I'd hope the company itself would be fine. I really hate this idea of the grand visionary. A good friend of mine who is a mechanical engineer despises Musk. I listened to a bit of his Joe Regan interview and when Regan asked him how he has the time to do all of the things he does, there are smoke jokes about him being an alien, but not once did he say, "Well I have an amazing team of engineers" and credit all the thousands of people in his organizations that actually do the work. He made it sound like he just constantly engineers things, but I find it hard to believe that at any point he's sitting down with CAD and fluid dynamic applications and mapping out experiments for rocket prototypes. I don't doubt he's capable of doing that with his background (or learning how to do it) but it's much more likely there is a whole team of really dedicated experts that he just leaves uncredited. Are Apple products different now that Jobs are gone? One could argue that, but the core people that make and design all their overpriced, planned obsolescence devices are still there, often uncredited, while everyone else likes to focus on the captain of a ship.

greedo 8y ago
Musk told Stanton that he had "one of the world's best engineering teams who normally design spaceships and spacesuits working on this thing 24 hours a day."[1] [1]https://www.businessinsider.com/elon-musk-reveals-email-thread-explaining-why-he-built-mini-submarine-2018-7 https://www.businessinsider.com/elon-musk-reveals-email-thre... That took all of 1 minute on Google...
emodendroket 8y ago
I said it before, but: ever read War and Peace? I think you could easily adapt Tolstoy's thesis to business: executives are mostly there to ratify the decisions their subordinates made on the spot. Tolstoy stakes out the most extreme position, but I think we could at least say executive control is more attenuated than executives would like to believe.
stcredzero 8y ago
Are Apple products different now that Jobs are gone? Yes. Jobs as local despot acted as a curb to bad decisions. Jobs had a vision which acted as a countervailing force to keep Apple from being completely sucked into being a money grubbing luxury goods company. the core people that make and design all their overpriced, planned obsolescence devices are still there, often uncredited, while everyone else likes to focus on the captain of a ship. We know from the historical record that Jobs had quite good judgement, even in technical fields, and we know that he countermanded and convinced executives and managers to steer them in the right direction. I suspect that the Apple of today is descending into being just a money-grubbing luxury goods company.

anthonybsd 8y ago

>Tesla has pulled itself back from the brink and may actually become a profitable car company This is a very very generous assessment of the dire financial situation TSLA is in. At best they have hit their production at the expense of quality which will only temporarily offset their costs. Any sustainable mid-term profitability is a very big question mark at this point.

badloginagain 8y ago
I thought the narrative was they just need to get through the short term before production stabilizes and is able to meet demand. I do feel there is a difference between Tesla the car, and Tesla the company. Tesla the car is still the most desirable electric on the market. Tesla the company is a different story altogether.
- JoshCole 8y ago
  The narrative shifts constantly because the narrative is anti-Tesla. So it has to shift, whenever they make it past another hurdle. It started with them being ridiculous for even trying to make an electric car. Then it became that they couldn't mass produce. Now they are being mass produced. It sometimes shifts towards their safety, but it isn't a preferred avenue of attack because the stats show that the cars are safer than other vehicles, which produces cognitive dissonance in people who are mislead as to the true nature of the news they are hearing about Tesla.
  - michaelt 8y ago
    The narrative shifts constantly because the narrative is anti-Tesla. So it has to shift, whenever they make it past another hurdle. Or from another perspective, the narrative shifts constantly because the delivery date for my $35,000 car keeps shifting :)
    - badloginagain 8y ago
      Pay another $1000 for priority queueing!

dirkgently 8y ago

> I hope for Space X and Tesla's sake that the reports of a directory and Executive ban don't come true. Why? Because Elon is a special snowflake and deserves a different treatment than other white-collar criminals?

deleted 8y ago
[deleted]
hef19898 8y ago
Absolutely not, when and if he is found guilty of market manipulation then be it, he deserves everything that coming his way. If not then, well not. It would just be pitty that hubris has destroyed a great legacy in that case. And, even more troubling, with Tesla basically being Musk its future, and that of its employees, looks rather grim all things considered. Best thing for Tesla would be if Musk was not found guilty and stepped down none the less. I don't see that happening so. SpaceX should be fine I think, even without him.
55555 8y ago
How about because nobody should be able to go from perfectly fine to having ruined their life* in under 30 seconds. you have one dumb thought, open twitter on your phone, push tweet, and it's over. That's not an ability people should have. We are impulsive and often dumb.
- gurumeditations 8y ago
  He’s a big boy.
- Slartie 8y ago
  He was perfectly fine to surrender his CEO position at Tesla (and any position of power in any other company he is in) in order to get rid of this "ability". He did not. Certain positions of power just come with the ability to ruin your life in seconds. Some even can ruin the life of others in milliseconds. You cannot cushion these people from these facts. If they cannot deal with that, they should surrender the power. The concept is called responsibility.

caleblloyd 8y ago

In addition to causing a short squeeze, his tweet also swung the options prices unfavorably for the time-bound put holders.

tptacek 8y ago

Amazingly, Musk apparently had reached a settlement with the SEC over this, then blew it up: https://twitter.com/tomgara/status/1045472592595996672 https://twitter.com/tomgara/status/1045472592595996672 I don't understand people who defend him as head of a public company.

wallace_f 8y ago
Perhaps some of what makes him capable of making these mistakes is also part of why he has multiple revolutionary companies.
- sokoloff 8y ago
  Being unconstrained by reality? You might actually be onto something there; I know a few people who are similarly unconstrained and they end up bringing just the right mix of crazy and sweat together to make something novel. It also has a serious downside in this particular case, however.
  - SmellyGeekBoy 8y ago
    Not wanting to make this political, but one could say the same about the current US president. Based on his social media output it seemed he was downright batshit insane when he got elected (some might say even still, although he seems to have calmed down a bit). He seems to be achieving things though and we didn't end up with WW3 as a lot of people predicted. Perhaps the world needs these crazy people occasionally to come in and stir up the pot? (Don't get me wrong, I'm not a fan of the guy and not being from the US my opinion doesn't really matter, but thought I'd give me $0.02 so to speak)
    - velcrovan 8y ago
      "Achieving things"? What things?
dlor 8y ago
I guess there's a difference between "head of a large public company" and "founder of a large public company". His track record at the latter speaks for itself. But the fact that someone who founded a company isn't necessarily the best person to run it long term is uncomfortable. Especially on a website like this one, with so many aspiring founders.

pvelagal 8y ago

SEC suing Elon Musk is , quite frankly one of the most abhorrent actions a US govt agency can ever do against genuine American Entrepreneurship and American innovative spirit. There is not a single human being on the planet who comes close to Elon Musk when it comes to big , bold innovation and tech entrepreneurship who is putting his heart and soul into leading the human race into the future.

ajmurmann 8y ago
I love the work that Musk has done. Everyone has to play by the same rules though. We cannot bend the law because someone has otherwise done amazing work.
- pvelagal 8y ago
  So how many financial execs got punished for creating the 2008 financial crisis, the worst in our lifetimes (hopefully) , which brought the world to the brink ? https://thehill.com/blogs/pundits-blog/finance/309544-why-have-no-ceos-been-punished-for-the-financial-crisis https://thehill.com/blogs/pundits-blog/finance/309544-why-ha...
  - deleted 8y ago
    [deleted]
  - ajmurmann 8y ago
    What they did might have been morally appalling, but much harder to pin as breaking a law. What Elon did was a blatant and highly public violation of regulations
    - manicdee 8y ago
      Obviously Elon’s mistake was not changing the laws to make his crime legal. Cf Goldman Sachs the great vampire squid.
  - EpicEng 8y ago
    Not an apples to apples comparison there, but even if it were; is your argument now that we should let Elon get away with breaking the law because others have gotten away with it in the past and you happen to respect Elon more than those people?

IAmGraydon 8y ago

Exactly. It’s called a stop loss. A spike in the wrong direction can be very costly to shorts.

apatters 8y ago

> All Elon had to do was keep his head down and not pick twitter fights.... You know what, this could be said about a lot of people, including the freaking President. I'm beginning to wonder if the real problem is Twitter. Specifically the most fundamental aspect of its design -- the ability to blast off brief messages to thousands of people any time, anywhere. Maybe we're learning that that this design leads people, even smart, well-meaning people, to publish crap. No one is crafting well thought out, quality content in 280 characters on their phone. The vast majority of Tweets and RTs are going to be total junk, lizard brain stuff. Sure enough Twitter has become the abuse hub of the Internet. Sure, people love to use it. They love to use cocaine too once they get a taste. And drinking socially is fine, but booze too hard and the nicest person can turn into a monster. Maybe we just shouldn't have what Twitter provides.

citrablue 8y ago
Really? You want to blame cocaine and hard booze? 1 to many communications is useful. Many to many communications (email) is useful. Push comms are useful. People are responsible for what they do, and what they say. Be it drugs or (I can't believe I'm saying this), Twitter. The most interesting thing is that many would blame Trump more for his Twitter mis-use than people who mis-use substances. And, conversely, many blame drug abusers but excuse Trump. In the end, we are either responsible for our actions or we are not. I believe the former is a crucial piece for functioning society; it needs to be tempered with a non-judgemental attitude and treated as a public health issue if it spreads too far.
JoshCole 8y ago
I completely agree with you that Twitter is playing a casual role in the degradation of discourse within our society. Go to the popular Twitter feeds and there are very obvious bot posts trying to scam and manipulate people. Twitter has not managed to stop them. Elon Musk's twitter feed is a great example of this. It even has the bots pretending to be him. Here, if you want to appear popular and have greater ability to manipulate people, you can buy some followers: https://devumi.com/twitter-followers/ https://devumi.com/twitter-followers/ Now regardless of your worthiness you have social proof! Advocate for the lack of existence of a round earth to your hearts content, now with greater effectiveness. The spread property of news on Twitter favors falsehood over truth: https://www.businessinsider.com/mit-study-fake-news-spreads-6-times-faster-on-twitter-than-truth-2018-3 https://www.businessinsider.com/mit-study-fake-news-spreads-... This fact when combined with medium as message https://www.litcharts.com/lit/amusing-ourselves-to-death/chapter-1-the-medium-is-the-metaphor https://www.litcharts.com/lit/amusing-ourselves-to-death/cha... leads to a system which actively promotes the wrong sort of content. Clickbait is a reality, because clickbait gets clicks, so people write clickbait titles. The existence of the rules like those Hacker News has are a fight against these forces. This community was built in part with an understanding that these forces are real and harmful to discourse. Twitter meanwhile has better engagement metrics by not solving these problems. So don't expect them to change, without any effort on their part. Fighting your own incentives is very hard. Twitter is basically addicted to harming discourse. Obviously, no ill will on its part, since this stuff wasn't obvious early on. It has benefits too though. Like getting to hear the perspective of the people in question, without intermediary.

erikb 8y ago

> So when Elon tweeted, a whole whack of shorts got stopped out What means stopped out? The bank forcing the lender to give the stock back right at this point?

sokoloff 8y ago
Many investors (long or short) place what are called stop orders to protect their positions from steep losses. For a long investor, you might buy a stock at $100, watch it go up to $150 and enter a sell-stop order at $130. That stop order has no effect so long as the price stays above $130. When/if the stock drops to $130, the order becomes a market order to sell out, protecting from further losses. For a short seller, they might place a buy-stop order (at a price higher than the current price) to protect from disastrous runaway price to the high side. Those stops could have been triggered by the run-up after Musk's tweet.
siberianbear 8y ago
"Shorting" a stock means selling it without owning it, essentially owning negative stock. You're betting that it will go down, and then when it does go down, you close your position by buying the stock (to get back to zero shares). The risk in doing this is unlimited. If you short a stock at $100, and then it goes to $500, you've lost $400. Your broker doesn't want to take liability for your loss if you're not able to cover it. So your broker will forcibly close your position for you. Even if your broker doesn't close your position, you might do it yourself to stop losing money. When a lot of people do this all at once, it's called a "short squeeze" as everyone who was short buys shares to close their short positions. It can make the price go up. I don't follow Tesla's stock price, but Musk getting on Twitter saying something that could make the stock price go up could (and perhaps did) cause a short squeeze.
- erikb 8y ago
  My understanding is different: Shorting a stock means borrowing it and paying a fee for borrowing it. Then selling the borrowed stock and hoping when you buy it back it's worth less. If the borrower doesn't want his stock back and the price is too high for you, then you simply don't buy and continue to pay the fee. So if you borrow stock for $100, maybe each year you pay a $5 fee, and sell it for $100. Considering there wouldn't be any transaction fees you would now have $95. If the price now rises to $500, you don't buy but continue to pay the $5. So it means you are only $90 ahead instead of $95. But you are not in the minus. This is actually a really good deal for both the borrower and the short seller, which is why I bet there are lots of rules forbidding that and banks not actually doing it if you don't borrow a certain minimum size of a few million $. I don't know that, though. In theory you and I could do that game as well, if it's not illegal.

tinco 8y ago

Why do you say for SpaceX's sake? Would it not be great news for SpaceX that their CEO would be forced out of the other companies he's running, and thus almost has to focus most of his time on SpaceX?

Lewton 8y ago
When the sec bans you from running a company, you’re banned from running -any- company
- Faark 8y ago
  > The SEC [..] will ask a judge to bar Musk from serving as an officer or director of a public company Article says public company. SpaceX is private.

tinkerteller 8y ago

Personally I don't Musk had a choice. If he didn't do what he did then very likely Tesla would be bankrupt by now because of its debt obligations + short sellers. The short sellers counted on it. The choices he faced were go bankrupt and lose company or do this risky move and hope SEC lets you go with slap on the wrist.

dnautics 8y ago

I think it's quite interesting that the SEC is obviously in the right, but it brings to question whether or not broadly, the SEC serves the public good.