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Banning Shorts

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Shorts bet that a company will fail and go bankrupt so that they can make a lot money and win. Nothin wrong with that. Not much different from Long’s betting that a company will succeed.

It is only natural for anyone to work hard to win.

So the shorts set about working on innovative ways to kill the company: Spread lies and rumors. Like the recent one about Tesla skipping brake tests.

So there is a reason why short sellers are hated and reviled by entrepreneurs and hard working families. Scum of the investing world on par with the pump and dump pimps like GS,MS etc..
 
How? How does a collapse of the share price cause the collapse of the company?

From my perspective, the collapse of the company causes the collapse of the share price.

The share price is supposed to represent the value of the company.
You're exactly correct.

Short-sellers are simply placing a bet that the stock will go down, not up. They're not necessarily betting on the company to fail. They made money if they shorted near recent highs and covered near recent lows.

The company's ultimate success or failure has everything to do with its finances, not the buyers/sellers of its stock.
 
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You're exactly correct.

Short-sellers are simply placing a bet that the stock will go down, not up. They're not necessarily betting on the company to fail. They made money if they shorted near recent highs and covered near recent lows.

The company's ultimate success or failure has everything to do with its finances, not the buyers/sellers of its stock.

I couldn't possibly disagree more with your post. In the case of Tesla shorts are ABSOLUTELY betting on the company to fail, they want it to fail, they want to enact some odd sense of revenge against Elon/Tesla.

Jeff
 
Well it works the other way. Tesla opening configuration for all reservation holders fed a bunch of call options and a price spike before the month end. However it did not represent anything which is why the price crashed back down below where it was before that happened.

Sudden changes in equity prices rarely have anything to do with fundamentals. It’s quite hard for an individual company to shock the market in the absence of an M&A or some huge drop in revenue that was unforeseen. That’s not going to happen with Tesla for years, if at all.

Bonds however are a different story. Prince changes in bonds (int he absence of a base rate change) ALWAYS are to do with fundamentals. Rather than discussing TSLA, this forum might want to spend some time looking at Tesla’s bond prices (hint they’re falling).

This is incorrect. Bond prices, just like equity prices, incorporate both fundamental and other factors. Bond markets are much less liquid, which is why most bond managers "beat the index," so in fact, equity markets are relatively more efficient.

The price of Tesla's convertible bonds go down when the stock price goes down, and vice versa, because the equity cushion protects bondholders. In other words, when that cushion gets smaller, then the convert price also naturally declines, and vice versa.

There are times when the two seemingly disconnect due to factors that affect bond prices outside of company-specific factors, such as interest rates, high yield spreads, and so on and so forth, but in no way bond prices "always are to do with fundamentals." - that is just simply wrong. Tesla's bond prices decline with rising interest rates, so it is expected that Tesla's bond prices would decline, all else equal. On top of that, TSLA has also wildly fluctuated.

I am pointing this out, repeatedly, because "bond prices" are used by FUDsters to scare off equity investors from TSLA. Be aware of this.
 
Bonds however are a different story. Prince changes in bonds (int he absence of a base rate change) ALWAYS are to do with fundamentals.

You haven't followed the bond markets very long, have you? They're just as subject to emotional, irrational price changes as the stock markets. *Different* emotional, irrational price changes, because bondholders look at different things than stockholders -- but they can be scared into an irrational "bank run" mentality, or on the other hand be way too sanguine the ability of a company to pay back its debt. The "high yield" market is particularly known for this; it doesn't apply so much where almost nobody thinks the company will default. *In addition*, there's a flow back and forth between stocks and bonds which is largely sentiment-driven, which means that sentiment can pull money out of all bonds (lowering all bond prices) or push money into all bonds (raising all bonds prices).

On top of this, convertible bonds trade in a *really* weird way -- they're traded by equity and options desks, and seem to be as sentiment-driven as *options* (i.e. even more than equity), so you have to look only at the straight bond prices if you want to see what the bondholders are thinking.

But most of the straight bonds are thinly traded, which means even more room for wild price swings...

Anecdote time. One of my family's best trades was buying Municipal Assistance Corporation bonds in ~1979. (This was the organization established by the state to straighten out the NY City budget, so these were municipal bonds.) It was at the peak of interest rates in general, and traders were pricing in a huge risk of default -- which was ridiculous, since the state was not politically capable of allowing default. The yield was insanely high and they were 30-year tax-free bonds. I dare you to tell me that price was "fundamentals based". Eventually, it corrected and they traded at a massive premium in later years.
 
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IMHO... Short sellers are the very definition of evil. This applies to every short seller who is betting on any company to fail... How in the world do you sleep at night knowing you're actively participating in trying to kill a company that employs people who have mortgages and families to feed? That statement isn't exclusive to Tesla either...

While I agree with you that wanting Tesla to fail is pretty immoral...

I want Peabody Coal to fail.
I don't care about the coal miners' mortgages and families, the coal mining is destroying the biosphere and threatening all our lives. Would you have a moral problem with short-selling Peabody Coal? Because I wouldn't. It would be good to force them to fail and harm their employees. Let them get honest livelihoods rather than livelihoods which are actively hurting other people.
 
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Because I'm not the cause of that. I'm not going out and burning down a Tesla factory, am I?
Perhaps YOU are not, but saboteurs like Martin Tripp essentially are actively trying to cause Tesla to fail. As are the stock manipulators who spread lies about SolarCity's financial situation. As Chanos & company tried to cause Fairfax Financial to fail.

Nothing wrong with someone who makes a quiet bet. Someone who spreads arrant nonsense for the purpose of causing a "bank run" is a bad person.
 
Well, I'd appreciate an explanation.

My understanding of how capitalism works:
  • Company issues shares to get money. Competitive market determines the value of those initial shares.
  • Competitive capital markets trade those shares.
  • If the company's value rises, the share price rises.
  • If the company's value falls, the share price falls.
So, how does a declining share price cause a company's failure?

Let's say Tesla's share price drops to $230 tomorrow. How does that cause them to go bankrupt?

You can't be this willfully obtuse. You're pretending to be this dumb. The goal of the Chanos types is to *prevent Tesla from refinancing its bonds*, thus causing it to go bankrupt. That's what they tried to do with Fairfax and with SolarCity.

Now, I happen to believe that they can't succeed, because Tesla can pay off its bonds from profits, conversion clauses, and so forth and doesn't *need* to refinance their bonds through Wall Street.

But the evidence is that Chanos & company think that Tesla needs to refinance their bonds (even though they're wrong). Under normal circumstances, this would not be an issue; Tesla would refinance their bonds. The Chanos-type disinformation campaign is designed to scare off people who would invest in the bonds, prevent bond refinancing, and cause bankruptcy. Specifically, I believe that the disinformation-spreaders think that Tesla will not have the cash to pay off the March 1 convertibles and haven't noticed Tesla's ability to change the conversion ratio, so they are aggressively trying to make sure the stock is below $360 to force Tesla to pay them off in cash (they haven't notice that this doesn't actually work) and they believe that Tesla won't have the cash (which it probably will). The goal of the Chanos types is to engineer a cash flow crisis. They can't, but they still think they can.

Trying to engineer an artificial cash flow crisis by spreading disinformation is really very wicked.
 
I couldn't possibly disagree more with your post. In the case of Tesla shorts are ABSOLUTELY betting on the company to fail, they want it to fail, they want to enact some odd sense of revenge against Elon/Tesla.

Jeff

Or they simply think the stock is waaaaay overvalued and is due to come back down to earth.
When you look at profit earnings of other auto manufacturers compared to their stock price, can't blame that logic.
 
While I agree with you that wanting Tesla to fail is pretty immoral...

I want Peabody Coal to fail.
I don't care about the coal miners' mortgages and families, the coal mining is destroying the biosphere and threatening all our lives. Would you have a moral problem with short-selling Peabody Coal? Because I wouldn't. It would be good to force them to fail and harm their employees. Let them get honest livelihoods rather than livelihoods which are actively hurting other people.
Exactly how would shorting Peabody stock cause it to fail?
 
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Or they simply think the stock is waaaaay overvalued and is due to come back down to earth.
When you look at profit earnings of other auto manufacturers compared to their stock price, can't blame that logic.

Failing to understand that Tesla are not just an auto manufacturer is just part of a wider failure to understand the company and its future prospects.
 
You can't be this willfully obtuse. You're pretending to be this dumb. The goal of the Chanos types is to *prevent Tesla from refinancing its bonds*, thus causing it to go bankrupt. That's what they tried to do with Fairfax and with SolarCity.

Solarcity didn't need the bond market. Solarcity could not profitably play the middle man on the placement of debt secured by solar installs. This is shown in Solarcity continually shrinking their ongoing business, even with the ITC still being in effect. Solarcity would not shrink if their activities were they cash flow positive.

Tesla is willing to take the expense of closing solarcity offices to stop the bleeding. No Chanos in the picture.
 
While I agree with you that wanting Tesla to fail is pretty immoral...

I want Peabody Coal to fail.
I don't care about the coal miners' mortgages and families, the coal mining is destroying the biosphere and threatening all our lives. Would you have a moral problem with short-selling Peabody Coal? Because I wouldn't. It would be good to force them to fail and harm their employees. Let them get honest livelihoods rather than livelihoods which are actively hurting other people.

Clearly I needed more context around my statement and you are absolutely well within the bounds of reasonableness to point out my lack of said context. When companies behave in an immoral and unethical way such as Peabody Coal or Valeant Pharmaceuticals, etc..., then yes absolutely use the market tools available to hold them accountable... Yes it does suck for their employees and I always try to look at it from a "how does the little guy get affected" point of view but there are always exceptions when dealing with companies that have behaved badly...

Tesla is NOT one of those companies and it's pretty clear that it's as much about conquering Elon than anything else... Ego's are a very powerful thing...

Jeff
 
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Hey guys!

I am back from my temp ban!


I am sure everyone is as happy to see me as I am to see them. Special thanks for the kind words from @Ocelot and @luvb2b (proj thread, great thread everyone should read btw) and others that made nice or supportive comments.


Anyways, I had some time to think during my ban, and I realized that this section is a tough section to moderate. So in a way I think giving me a temp ban was good, even if the reasoning was a bit hazy (reason given was that i spread misinformation, but no exact example, i admit sometimes i am wrong but i dont come here to spread lies on purpose, either way, water under the bridge).


I think Moderating shorts here is not easy, and you basically have to decide if a short is adding value to the forum or not (i think longs dont have to meet that requirement because it IS a Tesla forum, an acceptable double standard imo). If a short isnt adding value to the forum then i can see why mods would want to eliminate that person. @YasB and @CuriousSunbird are good shorts, but they tone it WAAAAAY back imo.



So with that said, my goal going forward is to only challenge objective thoughts and not get into subjective arguments where both sides clearly are not changing their mind. I will also stop calling Elon mean names because that isnt productive.


With all that said, I really do think this place is full of people who have the right idea (sustainable future, clean energy, etc), so I do value everyone's opinion, I just hope that people understand that shorts, like myself, are not against that idea just because we are against this company. I really do want everyone to take all information with a skeptics eye no matter which side you are on, and i think shorts can add value to the forum in that sense. You love with your heart, but you invest with your brain, mixing the two might not be the best idea.


Anyways, i hope to have constructive communication going forward and look forward productive debates with limited to zero mudslinging.
 
Hey guys!

I am back from my temp ban!


I am sure everyone is as happy to see me as I am to see them. Special thanks for the kind words from @Ocelot and @luvb2b (proj thread, great thread everyone should read btw) and others that made nice or supportive comments.


Anyways, I had some time to think during my ban, and I realized that this section is a tough section to moderate. So in a way I think giving me a temp ban was good, even if the reasoning was a bit hazy (reason given was that i spread misinformation, but no exact example, i admit sometimes i am wrong but i dont come here to spread lies on purpose, either way, water under the bridge).


I think Moderating shorts here is not easy, and you basically have to decide if a short is adding value to the forum or not (i think longs dont have to meet that requirement because it IS a Tesla forum, an acceptable double standard imo). If a short isnt adding value to the forum then i can see why mods would want to eliminate that person. @YasB and @CuriousSunbird are good shorts, but they tone it WAAAAAY back imo.



So with that said, my goal going forward is to only challenge objective thoughts and not get into subjective arguments where both sides clearly are not changing their mind. I will also stop calling Elon mean names because that isnt productive.


With all that said, I really do think this place is full of people who have the right idea (sustainable future, clean energy, etc), so I do value everyone's opinion, I just hope that people understand that shorts, like myself, are not against that idea just because we are against this company. I really do want everyone to take all information with a skeptics eye no matter which side you are on, and i think shorts can add value to the forum in that sense. You love with your heart, but you invest with your brain, mixing the two might not be the best idea.


Anyways, i hope to have constructive communication going forward and look forward productive debates with limited to zero mudslinging.

Or you could just you know... Leave... Words can't even begin to describe the visceral emotional hate I have towards people like you who are actively betting Tesla will fail... Then on top of that you post this ridiculous crap about "this place is full of people who the right idea"... Please... You don't care any more about the environment, sustainable transport, etc, than you do the assembly line worker with a mortgage and a family to feed. You just want to win, at all costs.

Jeff
 
Or you could just you know... Leave... Words can't even begin to describe the visceral emotional hate I have towards people like you who are actively betting Tesla will fail... Then on top of that you post this ridiculous crap about "this place is full of people who the right idea"... Please... You don't care any more about the environment, sustainable transport, etc, than you do the assembly line worker with a mortgage and a family to feed. You just want to win, at all costs.

Jeff


See this isnt true, or isnt fully true.


I DO want sustainable future, lower carbon emissions and all the things that Tesla states in its mission. In a way I WANT Tesla to succeed in that mission. The issue is I dont believe their business model is a viable one, or at the very laest is a severely over valued one.

You seem very emotional about this and I think thats great from a motivational standpoint, and I am sure you are a good person. However can I ask you a question.


People here on TMC who are long, sell stocks all the time. Are they also rooting for Tesla to fail? Or are they ok because it was a stock they already owned and they are just 'trading'?
 
See this isnt true, or isnt fully true.


I DO want sustainable future, lower carbon emissions and all the things that Tesla states in its mission. In a way I WANT Tesla to succeed in that mission. The issue is I dont believe their business model is a viable one, or at the very laest is a severely over valued one.

You seem very emotional about this and I think thats great from a motivational standpoint, and I am sure you are a good person. However can I ask you a question.


People here on TMC who are long, sell stocks all the time. Are they also rooting for Tesla to fail? Or are they ok because it was a stock they already owned and they are just 'trading'?

Buying and selling stocks is far different from shorting them. You know this, and it's a intellectually dishonest question to even ask.

Short sellers are a necessary evil in the market and they do occasionally operate in an ethical and responsible manor, such as in the case of Valeant or Enron or other companies who deceived shareholders and employees for their own greedy aspirations. Unfortunately, ethics and responsibility aren't terribly high on most short sellers priority lists so they target companies like Tesla and people like Elon for reasons that I still don't quite understand...

Jeff
 
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