from Hacker News

Elon Musk vs. Short sellers

by lazydon on 7/13/18, 11:18 AM with 55 comments

  • by DiabloD3 on 7/13/18, 1:25 PM

    I'm surprised this guy didn't bring up the famous story of Overstock.com around 2005-2006, where at one point there were more shorts in existence than actual shares. The CEO of the company sued a bunch of large investment banks (who all heavily shorted his company).

    For those that don't understand, that is called "naked shorting", and that constitutes fraud by NASDAQ and the major investment banks.

    In the end, all of the investment banks that he sued, except for two (Goldman Sachs and Merrill Lynch) settled. The banks that did settle? Ended up getting their junk kicked in when their shorting scheme failed to work, and they lost a lot of money because the suit against them signaled there was no truth to their claims and the Overstock.com price went back up.

    I have no reason to believe that is not what is happening to Tesla currently. Given that this example and the example given on the forum post are very similar, and both turned out appropriately, maybe Elon Musk should consider suing the largest firms shorting his company.

  • by anonu on 7/13/18, 1:23 PM

    Lengthy article. But good review of how we got here.

    Shorting is as natural as going long... It's an important characteristic of any market. But the articles point is that the shorts might be clustered in the hands of some influential hedge fund guys... Who basically wage an information campaign to crush the stock... Whether they're right or wrong.

    In that sense, I disagree with the articles premise that Musk should ignore the short sellers. Fight fire with fire... Or a flame thrower. Musk's company is a super speculative one at this stage. So a lot of it runs on gut feelings and perspective. Not actual fundamentals.

  • by ckastner on 7/13/18, 1:12 PM

    The article makes an interesting case for the influence of short sellers on Tesla's stock and calls out some specific hedge fund managers.

    However, even if these "bad actors" (as the article calls them) do indeed influence the stock price: missing goals by a year, dwindling cash reserves, etc. are valid reasons for concern, but the article only mentions them for context, without addressing them.

  • by 21 on 7/13/18, 1:08 PM

    Overall short sellers are a good thing. They have skin in the game.

    They are like the people searching for software vulnerabilities motivated by big bounties.

  • by fhood on 7/13/18, 2:19 PM

    Hell of an article, I think it is clear that Tesla has had serious production problems with the model 3, but, then again, Tesla has never met their production goals on time, and only recently(ish) are we seeing shorts at the magnitude.

  • by calyth2018 on 7/13/18, 2:48 PM

    I take exception to the part about how the crashes and the fires are trying to stoke up some kind of self-fulfilling short sentiment.

    The majority of the article is backed with references and evidence, but there's no escaping of the reality that a lane-keeping cruise control being marketed as autopilot has and will take lives. That's not just some negative sentiments being drummed up, it's reality and human beings that are being harmed or killed.

    And all of that is very much on Tesla.

  • by addicted on 7/13/18, 3:28 PM

    The best reason to short Tesla would be that it has the same Market Cap as GM and a larger one than Ford.

    Or they have a history of missing production and profit targets.

    Or that you believe that the existing car industry can learn to make electric cars faster than Tesla can learn to scale profitably and consistently.

    Or that you believe that Tesla will be unable to maintain its premium pricing once it has luxury competitors who take EVs seriously, because their actual QC is pretty poor.

  • by tim333 on 7/15/18, 12:25 PM

    I held Fairfax shares through much of the shorting incident the article mentions and there are significant differences - Fairfax was a basically profitable company and the shorts were arguing that their accounting was fraudulent which turned out not to be.

    In the case of Tesla the arguments are different - that it won't make much money because model 3 production is delayed and Porsche and BMW are launching competing products. Time will tell I guess. I haven't seen them do anything outrageous like sending a private investigator to harass Prem Watsa's pastor. Prem sued them for $8bn after that and quite rightly I think. While he lost, it probably gave the shorts second thoughts about those kind of tactics https://www.vccircle.com/prem-watsa-led-fairfax-loses-8-bn-l...

  • by spookybones on 7/13/18, 2:02 PM

    Is there any concrete evidence of this, and, if so, shouldn't this be big news? I guess we would need leaked emails.

  • by tw1010 on 7/13/18, 12:58 PM

    TLDR?