Tesla short sellers lose $1B(cnbc.com)
cnbc.com
Tesla short sellers lose $1B
https://www.cnbc.com/2018/06/08/tesla-shares-to-pop-42-percent-as-model-3-profits-improve-with-musk-looking-to-china-analyst.html
82 comments
> Making predictions and not keeping score of predictions is useless.
Perhaps but I think you may misunderstand how these things work. "Nomura Instinet advising clients that the electric car maker's shares could rally 42 percent over the next year." is a sales pitch for people to become clients of Nomura and trade stuff. They have no interest in any one keeping score of their predictions. It's like "England may win the FA cup, place your bets with Ladbrokes" - not really about testability.
Perhaps but I think you may misunderstand how these things work. "Nomura Instinet advising clients that the electric car maker's shares could rally 42 percent over the next year." is a sales pitch for people to become clients of Nomura and trade stuff. They have no interest in any one keeping score of their predictions. It's like "England may win the FA cup, place your bets with Ladbrokes" - not really about testability.
The forecast for October made in January is 20. Sorry.
The market doesn't follow the news. The news follows the market. If it's on TV it's already too late.
Perhaps counterintuitively (in British English at least) the noun news is uncountable (e.g. referring to a mass rather than something that can be counted), and is singular in grammatical construction (so cannot be pluralised).
https://dictionary.cambridge.org/grammar/british-grammar/unc...
https://dictionary.cambridge.org/grammar/british-grammar/unc...
Thanks.
> If it's on TV it's already too late.
The same applies to when I hear about something from certain people. A part of me expects to hear about Columbus' "discovery" of America any century now from a few folks.
The same applies to when I hear about something from certain people. A part of me expects to hear about Columbus' "discovery" of America any century now from a few folks.
Well, it's too late to buy or sell the move they just reported but do many people do that?
The time to short was months ago, to be honest. Reversing the news is always a good strategy [1]
[1] unless it's news about Sears
[1] unless it's news about Sears
If there's enough money believing in the company the stock price doesn't really matter. They will hold as long as they believe the company has a chance to pay out (far) in the future. It's less a publicly traded stock and more a long term investment.
> It's less a publicly traded stock and more a long term investment
I thought that was kind of the original point of stock.
I thought that was kind of the original point of stock.
The point is a lower barrier of entry because anyone can just buy your stock and therefore a larger pool of potential investors. The downside is that the mass of those investors (on average) are not as well informed as a few select big investors. This gave Tesla a great amount of money to work with as long as their star was shining but now it could backfire badly.
Your theory is partially correct. Let's say Tesla is 10x overvalued. If the dumb believers weren't holding the stock, it would be 1x. This, as you said, is correct-- they're propping up the stock.
However, Tesla isn't immune to short-term stocks. It will fluctuate between 5x and 10x overvalued, e.g, the stock should really be at $50 but is trading around 300-400.
I'd be very happy if I shorted Tesla at $370 or whatever its high price was.
However, Tesla isn't immune to short-term stocks. It will fluctuate between 5x and 10x overvalued, e.g, the stock should really be at $50 but is trading around 300-400.
I'd be very happy if I shorted Tesla at $370 or whatever its high price was.
Is this the "short burn of the century" that Musk predicted at the beginning of May? (https://twitter.com/elonmusk/status/992388944774938626)
It’s the beginnings of it. Keep an eye on the price of deep out of the money calls on TSLA between $340-$380 to see what the market is predicting as we get closer to the next earnings call.
We need to break $330~ on TSLA with power
SPY is going to $300 this year.
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Reminds me of Bill Ackman's bet against Herbalife.
It's still in the same downward channel
The company itself seems to be in a downward spiral getting hit from multiple sides. To me it's unclear if they'll make it.
Can you provide a citation? If they make their 5k/week production target by the end of this month (which it looks like they will), they’re on their way to being cash flow positive, and also not needing another capital raise in the near term.
Challenges for sure, but “downward spiral”? Hyperbole.
Challenges for sure, but “downward spiral”? Hyperbole.
I am not sure why you think it's likely they'll hit 5k/week by the end of the month, considering Musk has been promising that for the better part of a year now. I admittedly do not know enough about the financials to know if that will truly make them cash flow positive, but even if it does they still have to pay back over $1 billion in debt at the beginning of 2019.
Tesla is going to need to raise more money in less than a year (probably less than 6 months). If you truly don't believe that, I will happily take a bet.
Tesla is going to need to raise more money in less than a year (probably less than 6 months). If you truly don't believe that, I will happily take a bet.
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Based on Musk’s track record, he delivers. Late? Sure. But always delivers.
Disclaimer: TSLA investor with extremely high limit order set in order to prevent my shares from being lent to short sellers
Disclaimer: TSLA investor with extremely high limit order set in order to prevent my shares from being lent to short sellers
Tesla cars being sold with 'full self-driving capable hardware' will NEVER reach level 4 autonomy. If you can create a bet around this with reasonable terms (so not waiting 50+ years because 'never' is a long time) I will put my life-savings into it.
How does high limit order prevents your shares from being lent out?
It ties the shares up as an open order.
https://www.quora.com/Is-it-true-that-putting-a-high-limit-s...
https://www.quora.com/Is-it-true-that-putting-a-high-limit-s...
This link does not provide evidence that it would prevent broker from lending out your shares. This “lock” is only placed internally in the broker’s internal system, there is nothing preventing the broker from lending out your share anyway. If they can’t get your shares back in time before your order triggers then they would just compensate you.
Where did you get this idea from, anyway?
Where did you get this idea from, anyway?
I confirmed it with my broker. They answer any questions I might have pretty quickly.
You should really buy lottery options on TSLA if you are going that long and dedicated. You would make millions easily.
Look for TSLA to break $330 and it is going to make a move.
Look for TSLA to break $330 and it is going to make a move.
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Do you think he will deliver on FSD eventually being available on already sold model 3's?
If FSD is possible at all, yes.
Hmm. I can easily see the case of FSD being possible with (supposedly very expensive) LIDAR-enabled Waymo hardware stack, but out of reach with hardware that goes into Tesla model 3.
That what makes this particlar Musk promise so interesting and so challenging. It's too late to change the price or hardware set. He has to deliver with software-only solution...
That what makes this particlar Musk promise so interesting and so challenging. It's too late to change the price or hardware set. He has to deliver with software-only solution...
Not necessarily. Assume that LIDAR becomes a requirement in the future, while the cost of LIDAR is decreasing very rapidly (a quick Google search will confirm this). The retrofit then becomes much cheaper in the future vs today.
It’s similar to how renewable projects are being bid on and sold today, with the price of the power being determined by what the equipment will cost several years in the future when it’s installed.
It’s similar to how renewable projects are being bid on and sold today, with the price of the power being determined by what the equipment will cost several years in the future when it’s installed.
Respectfully disagree. While LIDAR price is going down, retroffitting all FSD-enabled cars won't be cheap. It's like a recall, but instead of fixing or changing some part, you need to install new part, do all the wiring (which may include a lot of disassembling and assembling again) and test it. I can easily see 10-20 hours of human labor per car (plus cost of LIDAR itself, of course)
Why don’t you want to lend to short sellers?
Mission over economic/market efficiency. Short sellers are out only to profit, Tesla needs to profit to survive, but is out to electrify transportation. Make vultures suffer.
https://www.newyorker.com/cartoon/a16995
https://www.newyorker.com/cartoon/a16995
This is a cult like speech. Its management has fiduciary duty to its investors to do their best to give them return. It’s not a non profit foundation.
This subject comes up frequently on HN, but Tesla does not need to maximize their profits to ensure shareholder fiduciary requirements are met. I invest because it’s a cause that matters to me.
So you think people who work hard for Tesla do not want/expect to make money on their stock options? It’s literally a part of compensation package.
Employee compensation is valuable consideration of course. I prefer to not enable short sellers from profiting off of Tesla’s challenges, if that wasn’t clear.
Sidenote: Tesla employees with stock comp are going to do very well when a short squeeze drives the stock price up. And they deserve that comp.
Sidenote: Tesla employees with stock comp are going to do very well when a short squeeze drives the stock price up. And they deserve that comp.
Sure. But Tesla isn't the cult. Tesla is a fellow member. If St. Musk's vision doesn't pan out, I don't care much that I won't be the richest man in the wasteland.
To people like myself, those who short Tesla aren't short an unprofitable car company. They're short a better future. I make no apologies for being willing to take a small loss to cause them a big one. Anyone considering shorting this stock should consider that I'm not alone in that sentiment.
To people like myself, those who short Tesla aren't short an unprofitable car company. They're short a better future. I make no apologies for being willing to take a small loss to cause them a big one. Anyone considering shorting this stock should consider that I'm not alone in that sentiment.
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I like Tesla's short sellers in particular. They make the stock cheaper for actual investors :) (like me soon hopefully).
> and also not needing another capital raise in the near term.
It's very probably they need to raise cash for their foray into China.
> If they make their 5k/week production target by the end of this month
How many months/years is that behind schedule? Even Twitter will eventually be profitable.
It's very probably they need to raise cash for their foray into China.
> If they make their 5k/week production target by the end of this month
How many months/years is that behind schedule? Even Twitter will eventually be profitable.
maybe it's narrow minded, but for me, investing is all about giving a company mid- to longterm support so that they can expand their business. shorting is none of that. it doesn't create any value for society at large. if anything, it is, imv, close to professional gambling. but even gambling isn't this destructive. that's why i have zero empathy for those who lose money from shorting.
Purchasing common stock after an offering (I.e. on the open market) doesn’t do anything to support a company, either. It’s essentially just paper being traded back and forth.
But having the ability to liquidize their stake at almost any time makes it easier for investors to put money into the company, and therefore gets more investors on board.
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Unless the company needs to sell more stock or gives options/grants to employees. In either case, a higher price reduces the fraction of the company needed to be sold to get the same amount of cash. An increase is share price is almost always still beneficial to the company.
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It creates a lot of value when short sellers discover that businesses are lying or cooking the books, see enron, worldcom, etc.
Short sellers are acting on data and a worldview that is also how the long buyers are thinking of.
short sellers are always going to completely tank. And there's a reasonable chance that things will.
Regardless, there is a pretty strong argument to make that shorting is actually healthy for the economy because it leads to creative destruction
Regardless, there is a pretty strong argument to make that shorting is actually healthy for the economy because it leads to creative destruction
It sounds like you're describing something more like loans, than a market. Short sellers increase market liquidity, and help with price discovery. There's no destruction. This is a good thing, especially for a mega-hyped but under-delivering stock like Tesla.
one reason, that is not gambling, is insurance
e.g. for farmers, they can predict their harvest 5 months later, but can't know for sure.
They can short their own industry stocks. If the harvest goes good, they have crops to eat. If the harvest goes bad (e.g. forest fire), the short would net them some money.
http://www.theoptionsguide.com/short-hedge.aspx
e.g. for farmers, they can predict their harvest 5 months later, but can't know for sure.
They can short their own industry stocks. If the harvest goes good, they have crops to eat. If the harvest goes bad (e.g. forest fire), the short would net them some money.
http://www.theoptionsguide.com/short-hedge.aspx
Futures are provably a better vehicle for that, aren’t they?
if there is a forest fire and all crops were lost, how would futures help the farmer?
Futures let farmer lock-in a sell price for the crops, but without any crops due to the fire, the sell price wouldn't matter
Futures let farmer lock-in a sell price for the crops, but without any crops due to the fire, the sell price wouldn't matter
A lot of investing involves hedging and capital preservation, making bets and various counterbets (including shorts) to make sure you probably won’t lose st the end of the day. Some of those shorts maybe were not speculative but counter bets, and the shorter didn’t actually lose money overall (though I couldn’t tell you what they were countering).
Buying stock on the market doesn't really support the company. After the initial sell of the stock it's just casino.
How do you figure that?
If nobody buys the shares after the IPO then there is no demand and the market cap drops to zero. There’s no reward for the people who took the initial risk on the company and then what’s the point?
Ever heard of corporate raiding? A healthy stock price prevents hostile takeovers. It creates a class of emitionally invested citizens in the case of other external threats. It lets the public subsidize bonuses to employees (stock options) and in the case of a merger gives the company an asset that isn’t cash that can make up part of the compensation.
If nobody buys the shares after the IPO then there is no demand and the market cap drops to zero. There’s no reward for the people who took the initial risk on the company and then what’s the point?
Ever heard of corporate raiding? A healthy stock price prevents hostile takeovers. It creates a class of emitionally invested citizens in the case of other external threats. It lets the public subsidize bonuses to employees (stock options) and in the case of a merger gives the company an asset that isn’t cash that can make up part of the compensation.
Depending on the country and on the broker, investors who own the stock can profit substantially from lending out their holdings to short sellers. Unless of course you use one of those cheapest brokers or an index fund to “lower” your transaction costs - then the broker or the fund manager will lend out the stock which you own and pocket the entire profit.
So the response to the argument: investors support the company, short sellers support the investors.
So the response to the argument: investors support the company, short sellers support the investors.
I may use the typical argument that whoever is smart enough to profit on short will make "good use" of it.
Day trading is 95% luck, so we might as well apply that argument to roulette.
It's skill but anything can go wrong.
Shorting a stock will lower its value (supply and demand) so that the supporters which you are talking about can more easily invest in their favourite companies.
Do not bet against Tesla unless you are a professional. Tesla has incredible PR and Finance departments with background proponents holding enough capital to help them through rough patches. Side note, their Q2 2013 is still one of my favorite Finance/PR plays in recent memory.
Agree with the conclusion, disagree with the reasoning.
In the end, good products and strategies win. Betting against Tesla is dumb because they've proven the doubters wrong about their products and strategies over and over again. They've stayed right on course with the ten-year plan they laid out ten years ago, and every product they've built has been loved by an overwhelming majority of its owners. Not many companies can say that, not even successful ones.
Short sellers need to tip their caps and recognize that Tesla understands what it's doing better than they do. The longer it takes them to realize this, the more money they're going to lose.
In the end, good products and strategies win. Betting against Tesla is dumb because they've proven the doubters wrong about their products and strategies over and over again. They've stayed right on course with the ten-year plan they laid out ten years ago, and every product they've built has been loved by an overwhelming majority of its owners. Not many companies can say that, not even successful ones.
Short sellers need to tip their caps and recognize that Tesla understands what it's doing better than they do. The longer it takes them to realize this, the more money they're going to lose.
They have yet to prove any of the doubters wrong with regard to the model 3, sorry. Also, the stock is not traded on fundamentals as much as you or the rest of the public believes.
> They have yet to prove any of the doubters wrong with regard to the model 3, sorry.
There will always be an unproven next step. The point is that in each example where we have a clear conclusion, the conclusion has been favorable for Tesla. My money is on the Model 3 continuing this trend.
> Also, the stock is not traded on fundamentals as much as you or the rest of the public believes.
I never said (nor do I think) that the stock is traded on fundamentals.
There will always be an unproven next step. The point is that in each example where we have a clear conclusion, the conclusion has been favorable for Tesla. My money is on the Model 3 continuing this trend.
> Also, the stock is not traded on fundamentals as much as you or the rest of the public believes.
I never said (nor do I think) that the stock is traded on fundamentals.
> There will always be an unproven next step.
This makes no sense in a trading environment. The reason that shortsellers are hovering is because Tesla is trading at aggressive multiples with aggressive business goals they show signs of missing. I'd like to see your "clear conclusions" that the model 3 is succeeding.
> I never said (nor do I think) that the stock is traded on fundamentals.
Semantics at this point.
This makes no sense in a trading environment. The reason that shortsellers are hovering is because Tesla is trading at aggressive multiples with aggressive business goals they show signs of missing. I'd like to see your "clear conclusions" that the model 3 is succeeding.
> I never said (nor do I think) that the stock is traded on fundamentals.
Semantics at this point.
what happened in Q2 2013? sorry I did not follow news about Tesla until later
They used stock issuance to repay their government loan and the only headlines the public saw was "Tesla repays government loan early!" leaving stock price a net gain after the issuance
There was a time when half of Microsoft's net profits came from stock dilution. They were issuing new shares for employee stock option grants, so the strike price went into revenue every time options were exercised.
The schadenfreude crowd was waiting and hoping for MS to make a big misstep. Any slip in profit would reduce their P/E, and if the stock price leveled off they would get hit again when option exercises declined, taking them negative (fewer new employees also equals less stock revenue).
As one person put it, they were a bicycle. Stable while moving but would fall over as soon as they stopped. But I got bored of following MS long before those supposed hens came home to roost so I have no clue what really happened.
The schadenfreude crowd was waiting and hoping for MS to make a big misstep. Any slip in profit would reduce their P/E, and if the stock price leveled off they would get hit again when option exercises declined, taking them negative (fewer new employees also equals less stock revenue).
As one person put it, they were a bicycle. Stable while moving but would fall over as soon as they stopped. But I got bored of following MS long before those supposed hens came home to roost so I have no clue what really happened.
The price leveled out, the last few years of employee options expired out of the money. New employees got stock grants instead and the stock was stagnant in a narrow range for a decade.
In the left column the months (or years or days) you make the predictions in. Top months are the months you're making the predictions for. The trace (R) is the actual real value (forecast of January in January, i.e: you have the number).
So:
The forecast for October made in January is 22.
The forecast for October made in June is 13.
The forecast for October made in September is 42.
This way, we can track all forecasts and track errors. The chart has memory. The chart cuts through bullshit.
[0]: High Output Management - Andrew Grove