What for ups and downs Tesla has seen. High-volume trading each day prior to the 5-1 split pushed the price to more than USD 2,200 – at the beginning of this year, it was below USD 400. A USD 420 billion market cap for what exactly?

After the split, the stock continued to rally to over USD 500, or more than USD 2,500 based on the old price. While observing the rally, I was reading comments saying that a kind of swarm-like trade was boosting Tesla [Nasdaq: TSLA]. Investors on portals such as Robinhood, a neo-broker that boasts around 13 million users, nearly 500,000 of whom have bought the carmaker’s stock, seemed to be reinforcing each other’s bids, which reminded me high-frequency trading.

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Short sellers have certainly lost a lot of money by speculating that Tesla’s price would fall. However, shorts now add up to no more than 12 million prior to the split and 60 million thereafter. There were times when, according to pre-split numbers, 40 million Tesla shares were sold short. But I feel the current dip left a vacuum that could soon lead to the placement of another large number of shorts based on a market cap of over USD 450 billion. In all, 7 percent short interest is not that much, considering some funds and stockholders may make a hedge to secure unrealized gains while not selling their shares directly.

Well-known short sellers remain convinced that the electric carmaker is completely overrated and point to some questionable accounting entries, for example, in terms of receivables. Among those short sellers is Jim Chanos, who predicted Enron’s stock market fall from grace, suspecting the energy company was hiding its debt. He also recently made USD 100 million by shorting Wirecard stock. He will be keeping his Tesla shorts. And David Einhorn, of Greenlight Capital, expects the carmaker’s days at the top to be numbered should it join the S&P 500. In other words, “buy the rumor, sell the fact.” Einhorn claims the company used some creative accounting methods to meet the requirements for the index.

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read more in H2-international October 2020

Risk warning
Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small- and mid-cap businesses, which means their stocks may experience high volatility. The information in this article is based on publicly available sources, and the views and opinions expressed herein are those of the author only. They are not to be taken as a suggestion of what stocks to buy or sell and come without any explicit or implicit guarantee or warranty. The author focuses on mid-term and long-term prospects, not short-term gains, and may own shares in the company or the companies being analyzed.

Author: Sven Jösting, written September 1^st, 2020