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> Tesla is very leveraged right now and apparently it would be an issue if the share price dropped too much In other words, the shorts are totally right to be

> Tesla is very leveraged right now and apparently it would be an issue if the share price dropped too much In other words, the shorts are totally right to be taking their position? A company that depends on its stock price to stay afloat is not a healthy company. Let’s take AAPL as an example. Their stock could plunge to $1/share and they would be absolutely fine because they have positive free cash flow, and thus don’t need to rely ok raising capital via selling shares.

Ninjak2 7y ago
In your example, Apple would not be absolutely fine. Key employees are compensated largely in stock and many would start looking for other jobs if their trailing four years of RSU grants suddenly became nearly worthless. Now Apple could step up and issue additional RSUs to employees to keep them onboard, but that has consequences too. So you can see how a tanking stock price is extremely disruptive, even if you don't need to raise capital.
- firebones 7y ago
  Issuing additional RSUs for retention is something which, with their positive cashflow, they absolutely would do (handled by share repurchase) if the stock price dropped to the point it made rational sense. Who wouldn't stick around at Apple if they're printing money and your RSUs have a basis of $1?
Dylan16807 7y ago
> In other words, the shorts are totally right to be taking their position? Many of the shorters just think the company's overvalued. But anyone aiming for that event to trigger is making a bet that enough people will make the same bet, in deliberate disregard of whether the stock's value is appropriate for the actual business. It's kind of like a prisoner's dilemma. Is it 'right' for someone to defect? That motive isn't saying anything about the company. It's a pure meta-move. That places outside of the normal "markets efficiently allocate capital" logic. It's profitable but very much not efficient to swing your weight around and make a company go out of business in a way that owes you money.
- fouc 7y ago
  Yeah, good point, it's less an efficient market move and more of a profit-forcing move.

Ninjak2 7y ago

In your example, Apple would not be absolutely fine. Key employees are compensated largely in stock and many would start looking for other jobs if their trailing four years of RSU grants suddenly became nearly worthless. Now Apple could step up and issue additional RSUs to employees to keep them onboard, but that has consequences too. So you can see how a tanking stock price is extremely disruptive, even if you don't need to raise capital.

firebones 7y ago
Issuing additional RSUs for retention is something which, with their positive cashflow, they absolutely would do (handled by share repurchase) if the stock price dropped to the point it made rational sense. Who wouldn't stick around at Apple if they're printing money and your RSUs have a basis of $1?

Dylan16807 7y ago

> In other words, the shorts are totally right to be taking their position? Many of the shorters just think the company's overvalued. But anyone aiming for that event to trigger is making a bet that enough people will make the same bet, in deliberate disregard of whether the stock's value is appropriate for the actual business. It's kind of like a prisoner's dilemma. Is it 'right' for someone to defect? That motive isn't saying anything about the company. It's a pure meta-move. That places outside of the normal "markets efficiently allocate capital" logic. It's profitable but very much not efficient to swing your weight around and make a company go out of business in a way that owes you money.

fouc 7y ago
Yeah, good point, it's less an efficient market move and more of a profit-forcing move.