The Take

Who Likes Short Shorts?14/08/18

Guess who’s back? Publications Director Alex Conroy returns for another article this semester, discussing the enigmatic Elon Musk in this week’s edition of The Take:

We have published stories before about the power that social media now holds over the stock markets. But one of the more interesting cases of this phenomenon is the case of Elon Musk and the Tesla short sellers.

Tesla is having a mixed time as of late, with continued issues plaguing the massive rollout of the model 3 causing the company to almost literally burning money in an attempt to hit its production promises. But a recent deal inked with the Chinese government for both a third Gigafactory and access to local debt buyers, along with a surprisingly good quarterly report everything looks to be turning around.

A very similar story seems to be unfolding for Tesla’s enigmatic founder, Elon Musk on Twitter. At times the darling of the internet lauded for both caring for the environment and creator of flamethrowers. Elon has recently found himself the centre of some very negative press.

However, much like a certain politician, Elon seems to have mastered Twitter’s extraordinary ability to dominate the news cycle. This has been most prevalent in his online spares with vocal short sellers, being immediately followed by a bump in Tesla stock.  An excellent example of this was a May 4th tweet from Elon that both seamlessly plugged his flamethrowers and delivered a dig at his opponents, ‘Oh and uh short burn of the century coming soon. Flamethrowers should arrive just in time’. Tesla shares then proceeded to jump 4% that day.

A similar event occurred on June 17th with Musk again eluding to a coming reckoning for anyone in a short position, resulting in another 4% rally,

This brings us to Wednesday, were after much speculation of a stock fall, and the day before the release of an earnings report that would see short sellers collectively lost nearly $2 billion USD, Elon tweeting at David Einhorn a prominent short seller and one of Tesla’s loudest critics.

Einhorn himself discussing Tesla in his letter to investors, citing the stocks rally in Greenlight Capitals 5.4% Q2 losses, going on to say how Einhorn himself has stopped driving his Tesla and has switched to Jaguar, perhaps being unfamiliar with Jaguar being the car of choice for all major villains in pop culture. Elon again using Twitter to comment on the news tweeting he would send the hedge fund manager a box of short shorts to comfort him with his loses.

Elon is one of the most prolific tweeters among CEOs and its direct relationship with Tesla shares hasn’t gone unnoticed with Barclays and Quantopian Inc taking note in their reporting on the company. Quantopian Inc even going so far as to create a trading model based on the sentiment of Elon’s tweets, that if acted upon would have turned a profit if shares were bought when the tone was generally positive and sold when negative tones were used.

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