Although many reasons exist to why investors would short a stock, there are a bundle of reasons why specific investors like to short Tesla. The intention, of course, is to spread a rumour or two with the hope that the once confident investor would lose their cool and withdraw all investment
There are many controversial reasons why people short Tesla, the majority are seemingly short-sighted
But we're just going to cover the one with what I think, is the most significance
I call it... the 'bull' in 'bear' clothing
Profit the Rumour
Rumours are particularly dangerous when they are released into a population that is ignorant, most times through no fault of their own
It flares up a horrible feeling of second-guessing yourself and not genuinely having confidence in your own opinion or research
A single rumour could derail the most loyal conclusions in anyone, especially during times where there 'appears' to be suggestive evidence of these rumours
The big idea of the Tesla short investor is to prevent the wider public and broader community of investors realising the true potential of the company
In a way, it might be the actions of a 'smart' investor to realise the true potential of Tesla, spread the rumour to collapse the stock and then allow the stock to recover and rally to new height based purely on the actual value of the company
The idea here is that you have a high probability of gain in the long term and a short possibility of loss ( if you're an actual bull for the stock )
So, imagine if you're an investor and realise this. You are fully aware of Tesla's potential in the future. You don't get in and secure yourself a position as is, you try to 'make' yourself one
One way or another you have your connections with the media and get yourself onto podcasts with a large outreach and portray the idea that Tesla is doomed
In response to this, a lot of people listen and a number of them with big buy-ins on the stock believe the stories you tell and sell their stake, the stock drops and you've 'created' a position for yourself
What happens now?
Now you wait, not even that long, just stay under the radar for a bit. The actual value of Tesla as a company does the rest for you
Given enough time the stock will increase again and probably beat the price you shorted it from
This cycle of pushing the stock down upon rumour and then waiting for it to spring back based entirely on its actual value could even be called a 'smart strategy' for an investor
Its almost like they are a 'bull' in 'bear' clothing if you see the analogy!
They understand that if the wider population realised the actual potential, the stock would only trend one way and although that sounds fantastic, they realise it's a long term perspective they would have to adapt
Most investors don't want this, they want these 'pockets' within the stock line to buy in on the drops and sell on the highs
When you're dealing with big money as an investor, a bumpy but increasing line is better than a flat but increasing line because of the contrast of highs and lows along the way
Although I've used the term investor here a lot so far, I'm actually referring to a trader. The difference typically being that an investor is a long term and a trader is a short term
The Bluff
The smart short investor would understand that a company with momentum like Tesla is a growth stock that you can't slow down
The adoption of EV's is not only getting popular but it's implicitly becoming backed by law, the UK and many other countries have begun to ban diesel vehicles from cities and even some countries aim to ban the sale of diesel vehicles by 2030 to 2035
Of course, this still leaves combustion vehicles on the road, but with this momentum - you can see who's next for the chop
Knowing and understanding the above, the short investor puts on their 'bear' suit and roars at those who realise this fact and choose broadcast it to the wider community
You'll see short-sellers interrogated on popular youtube channel shows, the reason for this is that youtube channels are fantastic pools of positivity for investing
If a 'bear' could get in amongst that group and begin to spread rumour or speculation, they are speaking to a group of people they'd want to persuade
So the bluff is to know the future and try to force the present
Force the stock down imminently, with the knowledge that the stock will increase upon its own value eventually, and cycle this over and over
They might even have 50% of their shares bought in the long term that they don't touch and the remaining 50% used for 'scalping' the profit from their rumour & recovery technique
Understandably, shorting a stock is something that Elon hates - and we're with him on that one, because it's treating the company as a means to profit, rather than a genuine means to invest into the vision of the company
But when you're an investor and have quotas or whatever to meet. Perhaps you need to force things sometimes
Additionally, if they could force the stock down and then profit upon its recovery, it would create a good reputation for the short investor because they are continually making money for the company they work for
The Real Investor
By real, I'm referring to the investors with genuine intentions
They want to make a profit, but it's done by buying into the company as a means to support it and doing so with a long term perspective
This is hopefully the majority of investor and it's with the hope that collectively, this type of investor can win and the company can produce more money in order to fund their ventures
Interestingly enough, investing is becoming less and less of a 'niche' thing to do
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Anyhow, there's our rant on a theory behind the short-selling of the Tesla stock
Post your comment below if you think we're onto something, would you do the same if you were a market investor and part of your job relied on quotas for the amount of money you make?
Are you investing for the potential of Tesla to succeed or more for the means of making money, maybe both!
Regardless, the volatility on Tesla stock will be interesting for the next few years, maybe even the next few decades
Interesting times!
Thanks for reading
PutSimply
