Elon Musk's unveiling of Tesla short shorts could be the final nail in the coffin of Tesla's short-sellers.
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 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.
Tremendous buying pressure made sure it sold out very swiftly, which is quite reminiscent of Tesla’s stock these days.
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.
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.
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.
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 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.
Last modified: September 23, 2020 2:02 PM