It's so heavily shorted that there's a possibility of a short squeeze, which I would find quite delicious - not because I own TSLA, but because I want to see people hoping for failure get screwed.
Even a stock that is ninth most heavily shorted isn't necessary heavily against. The market is very very very long TSLA, they have bought into the idea and given it a lofty valuation as a result. People who are short are just balancing the optimism... it's not like they just want failure for failure's sake.
What makes you think that being short on a stock is the same as hoping for failure? I hope Tesla is fantastically successful, but I would consider shorting it if I were doing such things these days. They're two totally separate things.
I don't think they're separate. Shorting a stock means you make money from the stock's decline, and therefore from the company's failure. You hope to make money from your investment, so you hope for the company to fail, at least indirectly.
Furthermore, shorting a stock can harm the firm. Big short positions drive down the stock price, which affects public sentiment (their stock is down, they must be failing, I won't buy their car because they may not be here next year), makes it harder for them to retain employees, makes it harder to raise money by issuing more stock or bonds, etc. By shorting a stock, you are contributing to that company's failure (though of course the effect is miniscule for retail investors like me).
I would not buy even a undervalued stock for a tobacco company, because I don't want to support producers of tobacco products. And I don't want to impede progress in electric cars by shorting their producers, even if I think their stocks are overvalued. There's plenty of other investments available that align my finances with my hopes.
Short selling is nothing more than selling before you buy. If you believe that short selling drives prices down, then you believe that taking long positions drives it up. Neither is true.
Short selling provides more information and better liquidity to the market. It's a good thing.
Of course short selling drives prices down, while long positions drive prices up. That's basic supply and demand. What else could determine prices?
I agree that short selling is overall a good thing, though it can also be abused (e.g. naked shorts). I am not claiming any market abuse in the case of Tesla.
Most people do not buy individual stocks based purely on a risk calculation. They also want to believe that the firms are working for good, not evil, because buying a stock means you own part of that company, and therefore are in some small way responsible for its actions.
Short selling is the same, but in the opposite direction. You own a negative fraction of that company, and so your moral relationship to it has a minus sign. I think that Tesla is a good company. But some people think that owning no TSLA is still too much, and I hope they get burned (financially).
The short interest is only indicative of how many investors think that there is a greater chance TSLA is overpriced vs. underpriced. The short sellers may very well believe in Elon but they may also think that they have a superior risk-reward by shorting the stock right now. The high short interest is also indicative of investors having access to more ambiguous data, which is the case for a unique company with negative cash-flow and large market potential.
It's hard to believe in someone when your pay depends on their failure.
I compare it to companies who take out life insurance policies on their low-level employees, sometimes called dead peasant insurance. Would you want to work for a company that has a financial interest in your death? What if they told you that they believe in you, they really do, but the life insurance was so cheap that it was a superior risk-reward decision?
I would still say the company is wrong to do so: you should not bet against what you believe in, no matter how good you think the bet is. The stock market is not a game, and weaponized short selling can and has destroyed companies.
If you could short Tesla at a price of $135,000 per share, would you do it? I sure as hell would, and it has nothing whatsoever to do with my feelings about Tesla's business, except that it's not worth $135,000 per share today.
All right, but the "real" value of a stock is just one factor. Another one is the well-documented tendency of the public to be swept up in fervor for a company and an equity for reasons other than true value. That's another horse to ride.
Indeed. You buy when you think the the company undervalued and sell when you think it is overvalued. The order in which you do that is irrelevant and signals no emotion.
I believe the ingredients for a TSLA explosion are in place: small free float and large short interest. It just needs a spark...if press reaction is very positive, analyst upgrades would shortly follow. Retail investors will flock to the stock, followed by some institutions. If the latter is true, there would be no free float left.
In that scenario, short sellers would have to cover their positions, but be unable to find the shares to do so, resulting in a big (but temporary) stock blow-up.
It's so heavily shorted that there's a possibility of a short squeeze, which I would find quite delicious - not because I own TSLA, but because I want to see people hoping for failure get screwed.