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Are Tesla Short-Sellers Enjoying Elon Musk’s Silence?

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Tesla stock

In the first two months of the fourth quarter, Tesla (TSLA) gave its investors a reason to celebrate by defying the broader market sell-off. In October and November combined, the company’s stock surged by 32.4%, while the S&P 500 Index and the NASDAQ Composite Index (QQQ) fell by 5.3% and 8.9%, respectively. In contrast, December is proving to be underwhelming for Tesla investors (IWB).

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Tesla short-sellers versus Musk

Tesla’s CEO Elon Musk is well known for openly criticizing short sellers and lashing out at sell-side analysts. During the company’s first-quarter earnings call, he rejected questions from a couple of analysts saying, “Boring bonehead questions are not cool. Next,” and “These questions are so dry. They’re killing me.”

In June 2018, Musk warned bears on Twitter, saying, “They have about three weeks before their short position explodes.” Musk later during TSLA’s third-quarter earnings call apologized to analysts for his rude behavior on the previous quarterly call. Nonetheless, his August tweet saying “taking Tesla private,” led him into legal trouble with the SEC. In October, Musk said that “Short-sellers are value destroyers. Should definitely be illegal.”

In its settlement offer to Musk, the SEC mandated Tesla “put in place additional controls and procedures to oversee Musk’s communications.” After the court’s approval to the settlement deal, Musk has been unable to publically express his views against short-sellers like he frequently did before.

In the week ended December 21, TSLA fell by 12.6%, underperforming peers (IYK) (IWF) (XNTK) such as General Motors (GM) and Ford (F) despite the absence of a key negative update about Tesla. Last week, GM and Ford fell by 6.0% and 5.5%, respectively. While at times, Musk’s tweets against short sellers have backfired and caused Tesla stock to fall, more often than not they have boosted investors’ confidence.

We’ll look at Musk’s recent tweet about Tesla and other electric carmakers including its Chinese rival NIO (NIO) in the next part.

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