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Elon Musk Rubs Salt in Tesla Short-Sellers’ Wounds With His ‘Short Shorts’

Last Updated September 23, 2020 2:02 PM
Chinmay Pandya
Last Updated September 23, 2020 2:02 PM
  • Elon Musk unveiled Tesla’s ‘short shorts’ priced at $69.420, which sold out within hours.
  • This is a proverbial kick in the gut for Tesla’s short-sellers, who have lost a fortune trying to short Tesla.
  • Short sellers like Stanphyl Capital are going to get crushed again, despite having convincing arguments about the flailing fundamentals of Tesla and Elon Musk’s lying habits.

Elon Musk never misses a chance to rub salt in Tesla (NASDAQ:TSLA) short-sellers’ wounds. His latest unveiling, the ‘Tesla short shorts,’  came with a Tesla badge and ‘S3XY’ spelled on the back.

The short shorts cost $69.420–a sly reference to the infamous tweet  that got him into hot water with the SEC and cost him his position as Tesla chairman. 

The short shorts effectively accomplished two things for Musk: a ton of free PR while making money at the same time.

Unsurprisingly, buyers came in en masse and broke the website within hours.

Elon Musk's tweet announcing Tesla short shorts
Elon Musk announces Tesla’s short shorts. | Source: Twitter 

Tremendous buying pressure made sure it sold out very swiftly, which is quite reminiscent of Tesla’s stock these days.

Tesla stock's price chart
Tesla’s startling rally over the past year. | Source: Tradingview 

Tesla’s short shorts selling out so quickly is a kick in the gut for those short-sellers who have lost a fortune trying to short the company’s stock.  It’s also a dire warning to stubborn short-sellers like Stanphyl Capital, who still hold a short position.

Short-Sellers Could Get Crushed Again

Last week, folks at Stanphyl Capital wrote a letter to investors  explaining the reasons for their continued short position on Tesla.

The letter featured watertight arguments about the flailing fundamentals of the company, and Elon Musk’s lying habits.

Despite having a sound thesis, short-sellers like Stanphyl Capital are going to get crushed. Why? Because the broader market doesn’t care about fundamentals either. After record negative revisions in EPS and earnings estimates , the S&P 500 Index continues to rise. The benchmark is up over 1% Monday morning.

The broader market is ignoring fundamentals and the flailing real economy, thanks to the Federal Reserve’s money printing.

Total assets of Federal Reserve vs Wilshire 5000 index
Fed’s printing carries the market rally. | Source: FRED 

Tesla’s rally has fed off this stimulus and, of course, the fact that the company beat delivery estimates  for Q2 despite the pandemic.

You cannot forget amateur retail investors on Robinhood, who love the stock to bits. Tesla is one of the top-ten traded stocks on the platform. 

The Short Shorts Could Signal Historic Quarterly Results for Tesla

While the short shorts are a dig at Tesla bears, they could also be a warning about upcoming Q2 2020 earnings:

“Celebrate summer with Tesla Short Shorts. Run like the wind or entertain like Liberace with our red satin and gold trim design. Relax poolside or lounge indoors year-round with our limited-edition Tesla Short Shorts, featuring our signature Tesla logo in front with “S3XY” across the back. Enjoy exceptional comfort from the closing bell. – Tesla

It looks like short-sellers are going to have to run for cover following the Q2 earnings results.

Tesla is the largest U.S. equity short.
Tesla is the most shorted stock in U.S. | Source: Twitter 

Tesla has already reported three profitable quarters in a row , and a fourth one would be historic for the auto behemoth. It could also be the final nail in the coffin for Tesla’s short-sellers. It seems Elon Musk has an inkling that upcoming earnings will beat estimates despite the pandemic.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned securities.