April 4th, 2018 by James Ayre
Those pursuing a short-selling strategy of Tesla stock have raised their bets against the company by 10% since mid-March, due to the idea that the firm is facing problems and that the market was overly optimistic about Tesla-fueled disruption, according to the firm S3 Partners (financial analytics).
According to S3 Partners “Tesla shares sold short now stand at $31.5 million, or 25% of freely available shares,” as reported by Reuters.
As argued by Peter DeCaprio, a partner at Crow Point Partners: “This is a once-in-a-lifetime short. … It’s like the perfect storm of elements that you need in a short thesis. Usually you try to find 3 or 4 good ones, this has got 15. It’s everything. But everything is magnified because of the valuation.”
Commenting on Tesla’s announcement on Tuesday that it had built 2,020 Model 3s over just the last week — and was thus ramping up production rapidly — DeCaprio apparently referred to those figures as “irrelevant” because Tesla has yet to show that it is able to “build a car without incinerating boatloads of cash in the process,” as reported by Reuters.
A good talking point I suppose, if you’re looking to preach to the choir. Those who have taken a closer look at Tesla’s financial situation are very unlikely to be convinced though. The company’s valuation didn’t rise so high with people unaware that Tesla was spending all of its cash and more on future growth and market share in a rapidly forming market or five.
And, for what it’s worth, the company noted in its recent production announcement that it had no need for a capital raise this year — a contradiction of the assertions of many of the aforementioned short sellers.
From my vantage point here, the Tesla short-selling frenzy of the last few years seems to be functioning as a sort of microcosm of the wider world. It seems to be part of a widespread breakdown of the ability to comprehend what is actually happening, and to respond to situations strategically, rather than just clinging to ideas of what “should” happen. It’s as though power dynamics and overgeneralization are all that people are basing their positions on nowadays. Be careful that it doesn’t lose you too much money…
On that note, see this piece from 2 months ago: Tesla [TSLA] Short Sellers Have Lost $1 Billion In 2018.
Also, these two from Maarten seem relevant to the entire discussion, and seem to be in good part what the short sellers seem to be missing: