facebookWhat's up with Elon Musk and the whole Tesla short seller court case thing? why did this happen, and how does it affect the stock price? - Seedly

Anonymous

27 Oct 2019

Stocks

What's up with Elon Musk and the whole Tesla short seller court case thing? why did this happen, and how does it affect the stock price?

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Kelly Trinh

27 Oct 2019

Backoffice technical at financial services firm

It's complex but:

  • Tesla a bit of a tech darling (tech as in the battery tech, not your computer science tech) and has quite a lofty valuation compared to the underlying making-cars-business

  • There is lots of short interest in Tesla due to the above (ie a whole bunch of people shorting the firm expecting the price to drop).

  • Elon doesn't like this - it is people expressing negative views on his company after all.

  • To combat this, he announces a potential buy out of shares at a premium to market price (this would hurt short-sellers because any bump in share price due to this would require cash cover and could squeeze them out of the trade)

  • It turns out his actions were (basically) a bluff and he got into a lot of trouble because of this

In terms of share price, as the recent wework drama shows, the valuation can jump all over the place depending on sentiment and for Elon is a bit erratic (aside from the against-the-law buyout announcement, apparently he was smoking weed during a live interview on the internet?) so unclear what is long term outlook for TSLA.

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